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Internal Control - Coggle Diagram
Internal Control
Test of controls
Purpose of test of control
Obtaining additional audit evidence
Reduce substantive procedures
Audit procedures
Evaluate the effectiveness of control in
Preventing
Correcting
Detecting
4 Audit procedures
Inspection
:check:
Examine purchase order
Authorization
Inspect document
Inquiries
:question:
Who responsible on receiving cash :question:
Who responsible on recoding the cash received :question:
Observation
:lock:
Or only certain employees can access the company accounting system :question:
Need to key in specific ID and Password : :no_entry:
All employees can access the company accounting system :warning:
Reperformance
:star:
Reperform some of the inventory count :pen:
Reperform bank reconciliation for certain months :pen:
Components of Internal Control
Information and Communication
Internally Communicates
Internal parties
Externally Communicates
External parties
Relevant Information
Identify internal & external information
Risk Assessment
Identifies and Analyzes Risk
Assesses Fraud Risk
Specifying relevant objectives
Identifying and analyze significant change
Monitoring
Separate Evaluations
Ongoing Evaluations
Control Environment
Management’s Philosophy and Operating Style
Organizational Structure
Participation by those Charged with Governance
Assignment of Authority and Responsibility
Commitment to Competence
Human Resources Policies and Practices
Commitment to Integrity and Ethical Values
Control Activities
Transaction Controls
Input and Output Control
Processing Controls
Automated and Manual Transaction Controls
Technology Controls
Security Management
Technology Infrastructure
Definition
:red_flag:
Internal control is a processed that design by
Management
Other personnel
Board of directors
In order to provide reasonable assurance
Reliability of financial reporting
Compliance with applicable laws and regulations
Efficiency of operations
Objective of internal control
Timely preparation for financial statements
Completeness and accuracy of financial records
Safeguarding assets :lock:
Importance of Internal Control System
Organisation
:pencil2:
Objective:
Continuously evaluate
Weakness & new risk :fire:
Prepare statement on time
Produce accurate record
Steps in company practise
:
Background verification
Credit card details
Criminal serching :warning:
Vehicle purchase record
Flowchart & narractive note
Asset safeguard system
Lock up valuable aaset
Dual signature
Examine bank statement frequently
Concern：
Complex enviroment
Embezzlement
External Auditor
:silhouette:
Purposes:
Enhance credibility :star:
Provide unbiased audit report
Characteristic:
Independent & capable
fraud detection on tax compaince
MIRB
SAS
Voluntary tax payment
Collaboration with internal auditor:
:silhouettes:
Support by ISA 610
Not involve in significant judgement :no_entry:
Example in inventory
Review stock process
Implement stock provision
Adequency