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Series of tasks and records of an entity by which transactions are processed as a means of maintaining financial records
Accounting system
All the policies and procedures adopted by the management of an entity to assist in achieving management’s objective of ensuring, as far as practicable, orderly and efficient conduct of its business, etc.
Internal Control System
Internal Control Components (PSA 315)
Control environment; Entity’s risk assessment process; Information system, Control Activities, Monitoring
Includes the attitudes, awareness, and actions of management and those charged with governance concerning the entity’s internal control and its importance in the entity
Control environment
Process for identifying and responding to business risks and the results thereof
Entity’s risk assessment process
Risks can arise or change due to circumstances such as
Changes in operating environment, New personnel, New or revamped information systems, Rapid growth, New technology, New business models, products, or activities
Consists of infrastructure (physical and hardware components), software, people, procedures, and data
Information system
Involves providing an understanding of individual roles and responsibilities pertaining to internal control over financial reporting
Communication
The policies and procedures that help ensure that management directives are carried out, for example, that necessary actions are taken to address risks that threaten the achievement of the entity’s objectives
Control activities
Includes considering whether controls are operating as intended and that they are modified as appropriate for changes in conditions
Monitoring of controls
The auditor should document his understanding of internal control. The extent of documentation is a matter of the CPA’s judgment and the form of documentation depends upon
Preference and skills
Tests of control are performed to obtain audit evidence about the effectiveness of the
Design and operation/implementation of controls
Understanding of the design and operation/implementation of internal controls would help the auditors identify
Potentially reliable controls
Two Possible Risk Assessments
Maximum (high) control risk assessment; Below the maximum (less than high) control risk assessment
Audit approaches in relation to control risk assessment
Reliance and no reliance approach
PSA 315 is based on which internal control framework?
COSO ICIF
