Audit. Internal control system and methods for its assessment (most important)

Lecture notes, cheat sheets
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Audit. Internal control system and methods for its assessment (most important)

Lecture notes, cheat sheets

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21. INTERNAL CONTROL SYSTEM AND ITS EVALUATION METHODS

Evaluation of the accounting system and internal controls is an important step in planning an audit, since on the basis of this evaluation the essence, scope and time costs of the proposed audit procedures are determined. The reliability of the internal control system is directly dependent on the detail and timing of audit procedures. When confirming the effectiveness of the internal control system, the auditor may reduce the number of audit procedures performed and (or) reduce the sample size.

The main areas requiring special attention when evaluating internal control procedures are:

1) environment;

2) security;

3) compliance with legislation and other rules and requirements;

4) own and control risks and their impact on procedures.

The auditor should obtain written explanations from management regarding the existence of a system of internal control in order to initially assess its effectiveness. During planning, the auditor should take further steps in achieving an understanding of the accounting system of the public organization being audited. To this end, the auditor should verify compliance with the basic principles of accounting:

1) continuity of accounting;

2) double reflection of transactions on accounts;

3) the correctness of the monetary valuation of property, liabilities and business transactions;

4) compliance with accounting policies throughout the year, documentation of business transactions;

5) conducting inventories and reflecting its results on the accounts of accounting;

6) correct attribution of income and expenses to reporting periods;

7) compliance with the data of synthetic and analytical accounting.

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