ASSESSING THE EFFECTIVENESS OF INTERNAL CONTROL SYSTEM
Ascertaining Internal Control System
Methods of ascertaining the control systems are summarized as follows:
* Examining previous audit work,
* Client’s own documentation of the system,
* Interviews with client’s staff,
* Tracing transactions,
* Examining client’s documents,
* Observation of procedures.
a. Examining previous audit work:
The audit work should provide a record of the previous audit and how the system operates. Any change in the audit work should be documented for updating.
b. Clients own documentation of the system:
Some organizations have their on Standard Operating Procedures (SOP). These Standard Operating Procedures provides source of information and to the existing control systems. It is therefore important to check whether the system as described in the (SOP) is what actually practiced.
c. Interview with staff:
During various stages of the audit, the auditor will need to some members of the staff of the client and find out how they carry out the assigned duties. These questions will reveal existing control and give indication of potential problems.
d. Tracing transactions:
Walk through checks allow auditors to identify any examples of actual procedures that vary from intended procedures. It also helps the understanding of the entire process as well as identification of risks.
e. Examining client’s documents:
The auditor can also ascertain the clients control systems by examining some available documents provided by the client. For example minutes of management meeting may reveal control issues that require further investigation. Implementation or steering group meetings should be held for significant systems changes and documentations of these will be useful source of information.