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Audit Requirements Prior to the Act as they relate to Internal Controls
Prior to the Act the focus of an audit of the financial statements has been to provide an opinion on a company’s financial statements and not to report on internal control . Therefore, it is unlikely companies already will possess sufficient, organized documentation to support management’s assessment of the effectiveness of internal control.
Evaluation of Controls 404 Internal Control Deficiency More than remote likelihood of misstatement of financial statements More than inconsequential in amount * SIGNIFICANT DEFICIENCY: Must be reported to Audit Committee By itself or in combination with other deficiencies Results in more than a remote likelihood of material misstatement in financial statements MATERIAL WEAKNESS: Must be referred to in Attestation Report (results in adverse opinion) * Determined through judgment – there is not a published guideline for this .
Documentation will be basis and template for remaining processes Functional managers at operating company will work together with project team 404
Training & Education Operating Companies Majority of work to be done by functional managers and individuals at each operating company Project Team
Project team will develop training/project materials:
Training & Education Educate operating company participants via road-show training sessions 404
Documentation 404 Documentation of Process and Internal Controls Detailed documentation to be done after risk assessment and internal control process inventory is complete To be done by the process owner at operating company Uniform basis using common templates and techniques
Evaluation 404 Project team will evaluate controls, documentation and reporting Any control deficiencies will be explored and remedial steps will be taken Communication with External Auditors
Generally considered a significant account separate from accounts receivable since balances that affect the allowance account are based on management estimation processes rather than on routine transactions (i.e. sales and cash receipts)
Identify Controls Policies and procedures that are designed to monitor the achievement of the relevant process objectives, including identifying errors or fraud. Detect controls can be applied to groups of transactions. Detect Controls Procedures designed to prevent an error or fraud. Prevent controls are normally applied at a single transaction level. Many Prevent Controls are programmed controls residing in computer applications if used Prevent Controls Description Control Types:
Assure Proper Accounting for CIP versus Expenses. ( QAD does not have any inherent prevent controls for this condition. However an Audit of CIP Project may discover incorrectly coded transactions to the projects).
Physically Control Fixed Assets - Assign Asset Custodians, Tag Numbers and Asset Locations
– Fixed Asset Maintenance.
Conduct Physical Inventory of Fixed Assets – Complete Asset Disposal and Transfer Transactions.