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Unit 3 – Auditing 31 - Coggle Diagram
Unit 3 – Auditing 31
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LESSON 4 - Internal Controls, control objectives and test of controls in the cycle
Control objectives refer to certain objectives that the organisation wants to achieve with regards to every transaction. E.g. the organisation will want to make sure that there is supporting documentation is generated for each issue of raw materials to production. Thus the objective here is “validity”.
Test of controls refers to the way we test whether the internal controls are working as designed. You will thus take the internal control, and test the internal control through inspection (when it is a document), observation (when it is a process), and enquiry (about a control/process/policy). It is also important to remember that the test of controls are performed on a sample of documentation and not all the documents.
Internal controls refer to the control activities that the organisation should implement to ensure they achieve the desired objectives (as stated above). E.g. the organisation will implement internal controls that should be adhered to with regards to the authorisation of manufacturing goods.
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