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A1 Chap 10: Considering internal control - Coggle Diagram
A1 Chap 10: Considering internal control
Three
primary objectives
of
effective
internal control
.
Reliability of financial reporting
Efficiency/efectiveness of operations
Compliance with laws and regulation
Describe the differences in evaluating, reporting, and testing internal control for nonpublic companies
Obtain and document an understanding of internal control
5
components of the
COSO
internal control framework
Monitoring
Management’s ongoing and periodic assessment of the quality of internal control performance to determine whether controls are operating as intended and are modified when needed
Risk assessment
Def
:
Management’s
identification
and
analysis
of risks relevant to the preparation of financial statements in accordance with appropriate accounting frameworks such as GAAP or IFRS
Categories of management assertions that must be satisfied
Assertions about classes of transactions and other events
Assertions about account balances
Assertions about presentation and disclosure
Risk assessment processes
Assess significance of risks and likelihood of occurrence
Determine actions necessary to manage risks
Identify factors affecting risks
Communication and information
Def
Methods used to initiate, record, process, and report an entity’s transactions and to maintain accountability for related assets
Transaction-related audit objectives that must be satisfied
Occurrence
Completeness
Accuracy
Posting and summarization
Classification
Timing
Control emvironment
Def
:
Actions, policies, and procedures
that reflect the overall attitude of top management, directors, and owners of an entity about internal control and its importance
Subcomponents
(các tp phụ)
Commitment to competence
BOD & audit committee participation
Integrity & ethical values
Management’s philosophy and operating style
Organizational structure
Human resource policies & practices
Control activities
Def
Policies and procedures
that management has
established
to
meet its objectives
for financial reporting
Types of specific control activities:
Adequate separation of duties
Proper authorization of transactions and activities
Adequate documents and records
Physical control over assets and records
Independent checks on performance
Describe the process of designing and performing tests of controls.
Procedures for TOC
Inquire
Examine
Observe
Reeperform
Test of control -TOC
asess control risk
Contrast management’s responsibilities for maintaining internal control with the auditor’s responsibilities for evaluating and reporting on internal control
Management's section 404 reporting responsibilities
Results of annual internal control assessment
An acknowledgement (thừa nhận) of responsibility for internal controls
Management's assessment (đánh giá) of Internal Controls
Test operating effectiveness of IC
evaluate IC over FS
Management's Resposibilities for establishing Internal Control
Resonable asurance
Inherent limitations
Audit responsibilities for understanding IC
Primarily concerned
Classes of transactions
reliability of FS
Auditor Responsibilities for Reporting on IC
Understanding of control
Perform Test of Control
Class of transaction
Disclosures & related financial
Statement assertions
Significant account balances
Assess control risk by linking key controls and control deficiencies to transaction-related audit objectives.
Understand Section 404 requirements for auditor reporting on internal control