Flashcards
Internal Controls CH7
Cards in this deck (10)
- 1What are the five components of an internal control system- Control Activities
- Risk assessment processes
- Information Processing
- Monitoring
- Control Environment - 2The control environment includes..the governance and management function of an organisation
- 3Elements of the control environment that are relevant when the auditor obtains an understanding include:- communication and enforcement of integrity and ethical values
- commitment to competence
- participation of those charged with governance
- organisational structure
- assignment of authority and responsibility
- human resource policies and practices - 4What are the key matters of risk assessment process component (2)- identification of business risks relevant to financial reporting
- the process of estimation of significance of the risks - 5The information system includes all the procedures and records which are designed to: (4)- initiate, record, process and report transactions
- maintain accountability for assets, liabilities and equity
- resolve incorrect processing of transactions
- process and account for system overrides - 6What do examples of specific control activities include? (5)- Physical safeguards
- Authorisation
- Information Processing
- Review of Performance
- Segregation of duties - 7Define tests of controltests performed to obtain audit evidence about the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at an assertion level
- 8What are the four methods used for testing controls-- observation e.g observes mail opening procedure of an entity
- enquiry e.g consults purchase manager about capital expenditure methods
- re-performance e.g tests control in operation for purchases every year
- inspection e.g check receipts are recorded in the cash book - 9Give 6 reasons why internal controls are important- ensure all transactions are valid & authorised by responsible person
- all transactions are recorded without omission
- all applicable laws and regulations are complied with
- assets and records are safeguarded
- employees work is reviewed
- all management policies are adhered too - 10Reasons for limited internal control system in small organisations- lack of manpower
- cost effectiveness
- owners active involvement
- lack of evidence
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- Description
- Flashcards on Internal Controls CH7, created by deandrayton on 22/05/2014.
- Created by
- deandrayton · May 2014
- Updated
- Feb 19, 2016
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