MODULE 6: CONSIDERATION OF INTERNAL CONTROL

An auditor considers internal control in order to

• Determine whether assets are safeguarded

• Suggest improvements in internal control.

• Plan audit procedures

• Express an opinion

The primary purpose of the auditor's consideration of internal control is to provide a basis for

• Determining whether procedures and records that are concerned with the safeguarding of assets are reliable.

• Constructive suggestions to clients concerning deficiencies in internal control

• Determining the nature, timing, and extent of audit tests to be applied

• Expressions of an opinion.

The primary objective of procedures to be performed in obtaining an understanding of internal control is to provide an auditor with

• Evidential matter for use in reducing detection risk

• Knowledge necessary to plan the audit

• A basis for which to modify tests of controls

• Information necessary to prepare flowcharts.

Areas on to establish internal control is to

• Have a basis of planning the audit.

• Provide reasonable assurance that the objectives of the organization are achieved

• Encourage compliance with organizational objectives.

• Ensure the accuracy, reliability, and timeliness of information

What is the primary purpose of effective internal control organization?

• Achievement of certain organizational goals.

• Completion of a successful audit for the entity.

• Shareholders' involvement in the company's success

• Obtaining profitability and financial strength.

An effective internal control is not expected to provide reasonable assurance regarding the achievement of objectives concerning

• Reliability of financial reporting.

• Compliance to applicable laws and regulations.

• Elimination of material misstatements.

• Effectiveness and efficiency of operations.

Internal control is primarily established within a company to accomplish which of the following objectives?

• Prevent irregularities

• Provide reasonable assurance that the company's objective be achieved

• Catch all errors that may occur in the company

• Aid in the effective auditing of the company

Which of the following is not an element of an entity's internal control?

• Control risk

• Control activities

• The information System

• The control environment

One of the major components of an organization's internal control structure includes:

• Audit control risk

• The cost-benefit ratio

• Risk assessment

• Communication

Which of the following best describes the interrelated components of internal control?

• Organizational structure, management philosophy, and planning.

• Control environment, risk assessment, control activities, information and communication systems, and monitoring

• Risk assessment backup facilities, responsibility accounting and natural laws

• Legal environment of the firm, management philosophy, and organizational structure.