Accountancy Forum
Guidance and Internal Controls - Printable Version

+- Accountancy Forum (https://www.accountancy.com.pk/forum)
+-- Forum: The Profession (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=4)
+--- Forum: Accounting and Audit (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=7)
+--- Thread: Guidance and Internal Controls (/showthread.php?tid=6537)



Guidance and Internal Controls - awaisaftab - 09-10-2009

The guidance explains how auditors can apply the Board's (Board of Directors) internal control auditing That Is Integrated with An Audit of Financial Statements.
The guidance demonstrates how auditors can apply the principles described in the ISA and provides examples of approaches to particular auditing issues that might arise in audits companies

The auditor discusses in relation to the guidance for accounting staff entity-level controls, risk of management override, segregation of duties and alternative controls, information technology controls, financial reporting competencies, and testing controls with less formal documentation.


Thus the guidance is not limited to the financial control it also encompasses other controls beside financial control. Because other controls are also closely related to the financial reporting and affects the true and fairness of financial statements.
For instance if information technology controls are loose it will affect the fairness of accounting data.

In addition to obtaining an understanding of the entity and its environment, the auditor must also obtain an understanding of the entity’s internal controls

Auditors are expected to exercise judgment to tailor the audit plan to the risks facing the individual audit client, instead ofusing standardized "checklists" that may not reflect an allocation of audit work weighted toward high-risk areas (and
Weighted against unnecessary audit focus in low-risk areas

When significant risks exist, the auditor is required to evaluate the design of the entity’s related internal controls and determine whether the controls have been implemented and are effectively operating

Generally the auditor is concerned with the internal controls over the reliability of financial reporting, including the management of risks that may result in material misstatement of the financial statements. With respect to the effectiveness and efficiency of operations it is apparent that related controls are relevant to an audit if the controls relate to information or data used in applying audit procedures (e.g., controls pertaining to nonfinancial data that the auditor may use in analytical procedures, such as production statistics).