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21 Cards in this Set

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Internal Controls


  1. Control Environment
  2. Risk Assessment
  3. Control Activities
  4. Information & Communication
  5. Monitoring

Control Activity
  1. Policy (what to control)
  2. Procedure (how to control)
***responsibility of management

Control Categories
  1. Authorization
  2. Performance reviews
  3. Information processing
  4. Physical control
  5. Segregation of duties

Control Objectives
  1. Completeness
  2. Occurrence
  3. Cut Off
  4. Accuracy
  5. Classification

Information System Controls
  1. Access to data and programs
  2. Program changes and development
  3. Computer operations
  4. Continuity of operations

Control Frameworks
  1. Control environment (tone from top)
  2. Entity's risk assessment process
  3. Information systems
  4. Control Activities
  5. Client's monitoring of controls



Should ALL be tested

Key Internal Controls
  1. Mitigates RoMM
  2. Mitigates a risk affecting financial statements
  3. Detects and corrects material misstatement
  4. Detects and prevents fraud



ie a bank rec

COSO Framework
  • Control Environment (tone at top)
  • Key risks:
  • Operational
  • Compliance
  • Financial Reporting
  • Control activities for the key risks
  • Communicating the info to the employees
  • Monitoring

Credit Sales System


  • Identify Phases in system (sales order, fulfillment, invoicing, purchasing, returns...)
  • Identify: Objectives, Risks, Control activities

What can go wrong?

Purchasing System

Identify Phases in system (PO, reciving, invoice processing, payment processing, returns.)


Identify: Objectives, Risks, Control activities

Inventory System

identify where the risks are

Financial Reporting Process

what are the cut off dates?


journal entries


reconciliations

Payroll Cycle Example
  1. Risks
  2. Ask management re internal controls

What could go wrong in payroll that would impact the FS?

Assessing controls

Does the control work as desired? (design, implementation)


Does it mitigate the key risk?


Manual or automatic?


Who operates the control, how often?

Evaluation of control implementation walk through

Walk though a sample of 1.

Communicating control deficiencies

CAS 265


auditor to communicate with management


management letter


identification


implication


remediation

management letter


identification


implication


remediation

Testing operation of controls

Sample sizing


Inquire plus:


inspect


observe


re-perform






***is optional, "further audit testing***

IT Controls

Consider RoMM from client use of IT


Development of key application controls

Documentation of General Controls
  1. Understand the control
  2. procedures undertaken to test operating effectiveness
  3. Deficiencies detected
  4. Conclusions - re: effectiveness of the control and its impact on assertions.

If it is not documented it did not happen.

CAAT
  1. Improve extent of audit testing
  2. Perform manually impossible procedures
  3. cost effective
  4. increase understanding of client system and operations.

CAAT - Types
  1. Audit software - Substantive
  2. Embedded audit facilities - recreate their IT enviroment to see if you can mess with it
  3. Test data techniques