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Management has the responsibility to be sure that the internal control system can...(3 things)
-Ensure that assets and records are safeguarded
-Create an environment in which efficiency and effectiveness are encouraged and monitored.
-Generate reliable info for decision making
The auditor uses risk assessment procedures to...(4 things)
-Obtain an understanding of the environment's internal control
-identify the types of potential misstatements
-ascertain factors that affect the risk of material misstatement
-design tests of controls and substantive procedures
The auditor has a responsibility to...(2 things)
1. Understand an entity's internal control
2. Assess control risk
The auditor gains an understanding of the entity's internal controls in order to... (3 things)
1. Identify the type of potential misstatements
2. Pinpoint factors that affect the risk of material misstatements
3. Design tests of controls and substantive procedures
Four components of internal control under COSO framework....
1. Risk assessment
2. Control activities
3. Communication
4. Monitoring
The control environment is influenced by...
Commitment to competence, commitment to ethical values, management's philosophy and operating style, HR policies and practices, organizational structure, participation of those charged with governance, etc
Risk assessment process should consider
External and internal factors that that may arise and adversely affect the entity's ability to initiate, record, and process financial data consistent with the assertion's of management.
Control activities include (4 things)
1. Performance reviews
2. Information processing
3. Physical controls
4. Segregation of duties
Monitoring of controls include...(3 things)
1. Establishing a foundation for control effectiveness
2. Designing and executing monitoring procedures based on business risks
3. Assessing and reporting results
Planning an audit strategy...
Look at chart....
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