Chapter 6 internal control evaluation: assessing control risk

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Chapter 6internal control evaluationassessing
control risk
The second examination standard A
sufficient understanding of internal control
should be obtained to plan the audit. When
control risk is assessed below maximum,
sufficient appropriate audit evidence should be
obtained through tests of controls to support the
assessment.
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Key points
1. What is the prime and the secondary reason for
conducting an evaluation of an clients
IC? 2.Describe the three basic elements of
internal control and 5 components in COSO
report. 3.What seven types of errors or
irregularities in internal control intended to
prevent, detect, or correct? 4.explain the phase
of an evaluation of control and risk assessment.
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• 1.Internal control elements
• control environment
• accounting system
• control procedures

• 2.Phases of control evaluation
• Phase 1understanding the internal control
• phase 2assessing the control risk
• phase 3performing test of controls audit
  procedures

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Internal Control Evaluation and Control Risk
Assessment
Obtain an understanding of the clients internal
control
Preliminary risk assessment



Control environment
Control procedures
Accounting system



Document the environment
Document the procedures
Document the system
Assess control risk (preliminary)
Perform test of control procedures

Not perform
-

Assess control risk below the maximum
Audit programs

Document the control risk assessment
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1.Reasons for internal control evaluation

• consisting of the policies and procedures
  established and maintained by management to
  assist in achieving its objective of ensuring, as
  far as practical, the orderly and efficient
  conduct of the entitys business
•   ??????????,?????????????,????????????????????

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Accounting control Management controls

• ??????????,???????????????????????????????????????
  ?????????
• ?????????????????,??????????????????????????
  ?
• ?????????????????????????????????,????????????,?
  ????????????????????,?????????????????????
• Administrative controls

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CONTROL RISK

• ???????????????????,?????????????????????????????
  ?????P188
•  
• ????????????????????????(??????)????????????,??
  ??????(?1.0?0.5?0.3)?

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(1)The primary reason

• ????????????????, ??????????????????Audit
  program(????)? nature, timing, and extent
  (????????)?????
• ?????????????,?????????????????????????

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??????

• last years audit program
• (???????)
• an off-the-shelf "standard program"
• (???????)
• ???????????????????????????
• ?6-1?????????(?P188)?
  
  
  
  
  
  
  
  

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Account balance audit program????????(nature,
timing, and extent)

• ?????????????????????????????????????????,????????
  ?????????????
• The nature of procedures, ???????????????????????
  ?????
• Timing, ???????????????????(interim),??????????
  ??(year-end)?
• The extent, ????????????
• ?6-2(P189)

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Restricting account balance audit procedures

• ?6-2????????????????????,????????????????????
• ??????????????????,?????12?31?????????
• ???5??????15??????(recorded sales)???(bills of
  lading)????(vouching),???????
• ??(tracing)??5??????15?????? to recorded sales
  invoice(??????),???????
• ??????????

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??????????????

• (1)??(confirm)12?31?????????
• (2)??(omit)?12????????????????
• (3)????15?????????????????
• (4)????????????????
• (5)????15?????????????
  
  
  
  
  
  
  
  
  
• ?6-2?????????,???????????????????????

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• ???????????????(?????)???????????????????????????
  ???????????????????,??????????,??????(??????),????
  ???????(?????12?31???)???,???????????,????????????
  ?,????????????

???????????????????????,???????????????? Less
testing and audit work spread over a longer time
period.
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2.Communicating internal control weaknesses

• ?????????(secondary reason)
• ??????????????????????????????????????(management
  letter)????????????,??????????????????
• ???????????????????,??????????

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Report of significant weakness

• ?????????????,??????????????,?????????????????????
  ???????
• ?????????????????????????,????????????????????,?
  ???????????.??,????????????????????,5750??????????
  ???,????????????????

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(No Transcript)
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3.Management versus auditor responsibility

• ??????????????????????????????????????????????????
  ?????????????????????????????????,????????????????
  ??????

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Chapter 6internal control evaluationassessing
control risk

• Internal control elements
• control environment
• accounting system
• control procedures

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???????
20
???????
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INTERNAL CONTROL----- INTEGRATED FRAMEWORK

• Internal control is a process, effected by an
  entitys board of directors, management and other
  personnel, designed to provide reasonable
  assurance regarding the achievement of objectives
  in the following categorieseffectiveness and
  efficiency of operations, reliability of
  financial reporting, compliance with applicable
  laws and regulations?

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????????

• ???????????????????????,??????????????????????????
  ???????????????????

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???????? ???????? ?,?????? ???????? ??????
??????????????????????????
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? ? B
? ? A
? ? ? ? ?
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?????????,???????????????
? ? ? ? ?
???????????????,??????????
?????????
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Components

• Control environment
• Risk assessment
• Control activities
• Information and communication
• monitoring

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??????????

• ??????????,??????????????????????,???????????????
  ??
• (1) ????????????
• (2) ????????
• (3) ??????????
• (4) ??????????
• (5) ?????
• (6) ?????????
• (7) ??????????

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??????

• ???????????????????,??????????????????????,???????
  ???????????????????????????
• (1) ???
• (2) ???
• (3) ?????????

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(?)????

• ??????????,??????????????????????????????????????
  ??????????
• (1) ????????????????
• (2) ???????
• (3) ?????????
• (4) ?????
• (5) ????????
• (6) ???

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(?)?????

• ??????????????,?????,?????????????????????????????
  ????????????,??????????????????????,??????????????
  ????,??,??????????????,?????????????
• (1) ?????
• (2) ???

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(?)??

• ??????????,????????????????????????,??????????????
  ???,?????????????????????????,???????????????,????
  ???????
• (1) ????????
• (2) ?????
• (3) ?????

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• ??????????
• (1)????????????????
• (2)????????????????
• (3)????????????????
• (4)?????????
• (5)????????????????
• (6)?????????????

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Auditing Assignments(6)

• 1.prepare chapter 7.
• 2.????,????,???? ?
• (1)6.34--6.47
• (2)6.52,6.53,6.54