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Nature of internal audit work (Advantages of internal control (Prevent the…
Nature of internal audit work
Types of internal control activities
Segregation of duties
The principle purpose of segregation of duties is to reduce the opportunities for an individual to make and then conceal errors or irregularities while performing a task
Individual should be responsible for more than one of the following
:star: Authorising the transcations
:star: Recording the transaction
:star: Executing the transaction or having custody of assets
Proper authorization of transactions and activities
Initiating a transaction is the first step in information processing
every transaction must be properly authorized and only valid authorized transactions should executed and recorded if controls are to be satisfactory
Safeguarding of assets and information
Assets ,accounting records and other information and documentation must be physically protected and there should be limited access of these
Independent checks
This control activity is the careful and continuous review of the other control activities
Information and communication
Identifies the need for pertinent information to be identified ,captured and communicated in a form and time-frame that enables people to carry out responsibilities
Monitoring
Addresses the fact that most organization function in changing environment
Responsibility of management
Management designs and implement control activities and is accountable to the board in this regard
The Function of external auditors
The objective of am external auditors is to express an opinion on the reasonableness of financial statements
The function of internal auditor
Should assist the organization in maintaining effective controls by evaluating their effective and efficiency and by promoting continuous improvement
Limitations of internal control
Ensure an organization's success
Ensure the reliability of financial reporting and compliance with legislation and regulations
Advantages of internal control
Prevent the reputation of the organization becoming tarnished
Achieve its goals for profitability and outputs
Promote reliable financial reporting
Ensure compliance with legislation and regulations
Prevent resource losses
Control in IT environment
The internal auditor must also assess the adequacy and test the effective of IT of control . IT controls are divided into general and application controls
General controls
:star: Having pervasive effects, which means that if they are weak or absent ,they may negate the effects of the applications control
Application Controls
:star: They are designed to ensure completeness, accuracy ,authorization and validity of data captured and processed
Edit control is one of the most important application controls for structure , They ensure that errors in data will be detected
Responsibility of internal control
External Auditor should evaluate and test accounting structures, related internal control structure and financial control activities to achieve audit related objectives ,to express an opinion on financial statements
Internal Auditors should assess the adequacy and test the effectiveness of all internal control activities to achieve engagement objectives ,to express an opinion on the adequacy and effectiveness of controls in mitigating risks
Management should design internal control structure and implement internal control activities to achieve management's internal control objectives to meet organizational objectives