Jogging Head: CONSIDERING INTERNAL SETTINGS
Considering Internal Regulates
Interior Control Systems – ACC/544
Stephanie Sales space
University of Phoenix
September 29, 2014
Evaluating Inside Controls
An company internal handles are made up of five parts, which include: the control environment, risk analysis, control actions, monitoring, and information and communication. The five components of internal control are considered to get criteria for evaluating an organization's economic reporting settings and the bases for auditors' assessment of control risk as it pertains to an company financial statements (Lowers, ainsi que. al., 2007). " As a result, auditors need to consider the five elements in terms of (1) understanding a client's economical reporting handles and creating that understanding, (2) preliminarily assessing the control risk, and (3) testing the controls, reassessing control risk, and using that examination to strategy the remainder of the audit work” (Lowers, et. al., 2007, p. 161). Phase I – Understanding
Over the course of Phase i treatment an examine team will work to obtain a crystal clear understanding of a company's interior control environment and management's risk assessment. The review team will review the flow of transactions throughout the company's accounting system, plus the design of a few client control procedures (Lowers, et. al., 2007). From this step the audit team will execute their assessments in a top-down risk-based fashion that 1st examines company-level controls (CLCs) and then handles of significant business units in the company (Lowers, et. ing., 2007). Regulates within the control environment and companywide programs include:
• Management's risk assessment
• Centralized processing and handles including shared service surroundings • Period-end financial reporting process
• Controls to monitor outcomes of procedures
• Regulates to screen other controls
• Board-approved policies that address significant business control and risk management practices (Lowers, et. ing., 2007, l. 161). Once the audit staff has finished their study of CLCs the audit crew will then document their understanding through the use of narrative descriptions or flowcharts. The audit group will then work with one of those equipment to design a preliminary program of substantive techniques for auditing assertions associated with the company's account balances, which can be conducted in Phase 2 (Lowers, ainsi que. al., 2007). Phase 2 – Evaluation
After the review team has completed Phase i treatment the audit team will move into Period II and also the preliminary evaluation of the company's control hazards. Throughout the course of Phase 2 the audit team can analyze the control strengths and weaknesses of the business. A company's strengths are considered as specific features of very good general and application handles while its weak points are considered like a lack of regulates in particular areas (Lowers, ain. al., 2007). The review team's results and first conclusions will need to then be written up and documented in taxation files known as the bridge workpapers. In Stage II the audit staff will seek to answer this questions through its evaluation. Can control risk become low or less than optimum? Is lowering of the control risk evaluation cost-effective? Once the audit crew arrives at the answers of those questions it will then designate the regulates to be examined and the level of compliance necessary. " The distinction involving the understanding and documenting stage and the first control risk assessment stage is useful intended for understanding the audit work. Nevertheless , most auditors in practice the actual two collectively, not as individual and distinct audit tasks” (Lowers, ou. al., 2007). Phase III – Assessment
In the third and final phase the audit team will likely then perform testing of regulates of the specified...
References: Lowers, T. L., Ramsay, Ur. J., Sinason, D. They would., Strawser, T. R. (2007). Internal Control and Evaluation. Auditing and Assurance Solutions. 2nd impotence. The McGraw-Hill Companies.
New York City, NY.