Internal Control: Understanding and Testing 2024

Overview

Internal Control is designed to provide reasonable assurance to achieve the entity’s objectives related to financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations. It safeguards assets against unauthorized acquisition, use, or disposition and may include controls relating to financial reporting and operating objectives. Auditors should understand internal control relevant to the audit and the application of professional judgment. Most audit-related controls relate to financial reporting. However, not all controls related to financial reporting are appropriate for audits. Therefore, the auditor should evaluate the design of controls and determine whether they have been implemented by performing procedures and the inquiry of the entity’s personnel.

Highlights

Review of the audit requirements stated in the auditing standards regarding internal control activities
Analysis of the control environment, concentrating on privately-owned businesses
A detailed discussion of an effective system of internal control and related control activities as detailed in the updated COSO report
Sample risk assessment procedures to determine control risk for all major assertions
Discussion of how to reduce control risk to below maximum
Specific tests of controls that can be beneficial to a financial audit
Discussion of the requirements to test controls for Governmental audits

Prerequisites

None

Designed For

CPAs and auditors.

Objectives

Recognize areas where controls exist and the circumstances when controls can be tested
Determine when and how private companies maintain a system of internal control when formal processes do not exist
Identify strengths and weaknesses in a private company's control environment by performing risk assessment procedures and transaction walk-throughs