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Prepare Comprehensive Checklist for Internal Controls

In: Business and Management

Submitted By aerial1
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Internal Control Evaluation
An auditor uses a checklist template when conducting an audit of internal control. The auditor will assess the financial condition and internal procedures. Internal control process must comply with industry standards and regulatory requirements. Corporations must prepare responses to auditors and should have an internal control system in place. “Five components of internal control are considered to be criteria for evaluating a company’s financial reporting controls and the bases for auditor’s assessment of control risk as it relates to financial statements” (T. Louwers, R Ramsay, D Sinanson, J. Strawser, 2007 p. 163) The internal control evaluation has three phases in which an auditor uses to form assess the corporation and form an opinion.
Phase 1 Understand and Document the Client’s Internal Control
The primary objective of Phase 1 is to become familiar with the work and control environment. The auditor must learn the control environment by setting up interviews with staff. Auditor should ask specific questions about the flow of transactions in the accounting system. The corporation should provide the auditor with the design of the control procedures.
To examine the control environment and complete an evaluation, the auditor will contact the Human Resource Department for a copy of the code of employee conduct and performance methods. The organizational chart will help the auditor identify management team and area of responsibility. To measure staff skills and experience the auditor must review employee credentials. The auditor must assess and evaluate procedures that management established identifying risks. Typically an auditor will use an internal control questionnaire to document the control of understanding.

Phase 2 Assess the Control Risk
After gaining an understanding of control, an auditor will construct a preliminary...

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