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10 Cards in this Set
- Front
- Back
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What is Internal Control |
Provides reasonable assurance that... Material misstatements will be prevented F/Ss are reliable Assets are protected against misuse |
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Internal control relationship with substantive testing (direct/inverse?) |
INVERSE relationship Stronger IC = Less testing needed Weaker IC = More testing needed |
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Three Objectives of IC "ROC" |
Reliability of Financial Reporting Operational Efficiency/Effectiveness Compliance with laws and regulations |
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Five Components of IC (CCRIM) |
Control environment Control activities Risk assessment Information and communication Monitoring |
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Control Environment Assessment |
Sets tone for entire company Management's integrity/ethics Management competent? Healthy organizational structure? Good HR policies? Riskier individuals? Board/Audit Commitee |
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Risk Assessment (what does it determine?) |
Risk of material misstatement determines acceptable level of detection Risk |
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Detection risk (what does it determine?) |
Nature, Timing, Extent of auditing procedures |
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When Control Risk is assessed to be at Maximum |
No internal control testing is performed |
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What Control Risk is assessed to be below Maximum |
Auditor tests Internal Control Auditor evaluates Control Risk based on tests |
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Relationship between control risk and substantive tests (direct/inverse?) |
Inverse! Weaker internal control = more substantive testing Stronger internal control = less substantive testing |
