Internal Control

In: Business and Management

Submitted By nurfatinnawawi
Words 527
Pages 3
The auditor should evaluate the design effectiveness of controls by determining whether the
entity's controls, if they are applied as prescribed by persons possessing the necessary
authority and competence to perform the control effectively, satisfy the entity's control
objectives, and can effectively prevent, or detect and correct misstatements caused by errors
or fraud that could result in material misstatements in the financial statements. Procedures
performed to evaluate design effectiveness may include a mix of inquiry of appropriate
personnel, observation of the entity's operations, and inspection of relevant documentation.
Walkthroughs that include these procedures ordinarily are sufficient to evaluate design
effectiveness.
The auditor should test the operating effectiveness of a control by determining whether the
control is operating as designed and whether the person performing the control possesses
the necessary authority and competence to perform the control effectively procedures
performed test operating effectiveness may include a mix of inquiry of appropriate personnel,
observation of the entity’s operations, inspection of relevant documentation, recalculation
and re-performance of the control. In addition, the auditor should vary the nature, timing, and
extent of testing of controls from year to year to introduce unpredictability into the testing and
respond to changes in circumstances. For this reason, each year the auditor might test
controls at a different interim period, increase or reduce the number and types of test
performed, or change the combinations of procedures used.
When the auditors reports on effectiveness of controls that were operating during the roll
forward period, it is necessary for he or she to determine what additional audit evidence to be
obtain. The additional evidence that is necessary to update the result…...

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