Internal control in financial statement audit

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Internal control in financial statement audit

  1. 1. Internal control in financial statement audit<br />
  2. 2. Barker Group interview on Tuesday<br />Find information to assess overall inherent risk<br />Understand line items on financial statements<br />Find information to assess overall control risk<br />
  3. 3. <ul><li>Understand COSO framework for the client
  4. 4. General
  5. 5. Control environment
  6. 6. Risk assessment
  7. 7. Financial Reporting
  8. 8. Posting
  9. 9. Adjusting entries
  10. 10. Financial report prep
  11. 11. General IT controls
  12. 12. System software management
  13. 13. Access security
  14. 14. Networking and infrastructure
  15. 15. Application system management
  16. 16. Monitoring internal controls
  17. 17. Application or transaction level
  18. 18. Information and communication
  19. 19. Initiation, authorization, recording, processing, and reporting
  20. 20. Accounting records
  21. 21. Control Activities
  22. 22. IT application controls
  23. 23. Limitations of internal control
  24. 24. Override
  25. 25. Collusion
  26. 26. Error</li></ul>Assess Control Risk<br />
  27. 27. Assess Control Risk<br />Rely upon controls<br />Substantive strategy<br />Extent of testing depends on detection risk<br />
  28. 28. Assess Control Risk<br />Rely upon controls<br />Substantive strategy<br />Reliance strategy<br />Identify control upon which you rely for an assertion<br />Test Controls<br />Conclude on achieved level of control<br />
  29. 29. Assess Control Risk<br />Rely upon controls<br />Substantive strategy<br />Reliance strategy<br />Identify control upon which you rely for an assertion<br />Test Controls<br />Conclude on achieved level of control<br /><ul><li>Walkthrough
  30. 30. Inquiry
  31. 31. Observe
  32. 32. Inspect documents and records
  33. 33. Reperformance</li></li></ul><li>Assess Control Risk<br />Rely upon controls<br />Substantive strategy<br />Reliance strategy<br />Timing of testing depends on strategy and detection risk<br />
  34. 34. Communication of control deficiencies<br />Control deficiency: <br />does not prevent or detect and correct a misstatement<br />Significant deficiency<br />Important enough to merit attention<br />Material weakness<br />Reasonable possibility that a material misstatement will not be prevented or detected and corrected<br />Significant deficiencies and material weaknesses are reported to management and board.<br />

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