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A Checklist for Evaluating Internal Control

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Submitted By sahnid
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A Checklist for Evaluating Internal Control
ACC/544
January 17, 2011
Professor – Robert Cornett

Abstract

The Sarbanes-Oxley Act of 2002 requires an audit of management’s assessment of internal controls for publicly traded companies. In addition, the evaluation of a company’s internal control system is to assess control risk to give auditors a basis for planning the audit and to provide information useful to management to meet the company’s control mission. Five basic components of the internal control system and three evaluation phases help auditors to validate the complete internal control system. The data are best quantified with the use of an internal control checklist (Louwers, Ramsey, Sinason, & Strawser, 2007).

Internal controls represent safeguards that protect a company’s business operations and financial information. Business owners are typically responsible for developing and implementing internal controls for a company. Owners can use internal or external audits to evaluate the effectiveness of internal controls. This evaluation normally follows a standard process of measuring the company’s business operations and financial information (Vitez, 2009).
Interview Management Management interviews allow auditors to understand the mindset of business owners and other managers in the company. Interview questions include why the owner created certain internal controls, what the controls are for, do managers understand the purpose of the controls and what corrective measures are taken when a control violation is found (Vitez, 2009)..
Interview Employees
Employee interviews serve another important evaluation process. Auditors use employee interviews to determine how well individuals are trained for their jobs. The interviews can also shed more light on how well business owners and managers educate employees on the importance...

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