10. Internal Control And Auditor

Front 1

3 perspectives

Back 1

1.Board perspective
2.Audit perspective
3.Financial Controls

Front 2

Turnbull guidance

Back 2

1. Comply or explain why you hasn't complied
2. Boards statement of Internal Control
3. Disclose that there is a process of identifying, measuring and managing the significant risks faced by the company
4. That it has been in place for the year under review
5. That it is regularly reviewed by the board
6. That it conforms to the guidance
7. Acknowledgement that the Board s responsible for the company’s internal control and summarize the processes used
8. Discloses the process it has applied to deal with material internal control aspects of any significant problems disclosed in the annual report and accounts

Front 3

Turnbull guidance about importance of IC

Back 3

1. Principle based, not rules
2. Judgment of managers
3. IC- management of risk- acceptable level
4. IC==> efficiency of operations, assist law and regs compliance
5. Financial controls important part of IC, eliminate avoidable risk
6. Evolving constantly, regularly

Front 4

Corporate governance code

Back 4

1. Board should maintain sound risk man. and IC system
2. Annually review effectiveness of RM and IC and report to ShareHolders

Front 5

Auditor perspective

Back 5

ISA 265

Front 6

Need to understand

Back 6

1. The control environment
2. The entity’s risk assessment process
3. The information system
4. Control activities
5. Monitoring of controls

Front 7

ISA 265

Back 7

Auditor is required to obtain an understanding of internal control relevant to the audit when identifying and assessing the risks of material misstatement

Front 8

ISA 265

Back 8

1. Need to understand to design audit procedures
2. Not express opinion on IC !!!
3. Identify deficiencies during all audit, need to communicate give recommendations
4. Writing to those charged with governance

Front 9

Financial Controls

Back 9

Pay particular attention to Fin Reporting

Front 10

Good IC

Back 10

1. Competent, reliable personnel who possess integrity- most important in securing reliable Fin. Data, able to fulfill their responsibility, if ok data will be free of material misstatements

2. Clearly defined areas of authority and responsibility- clarity, knows expectations, know who has erred

3. Proper authorisation procedures- transactions approved by authorized person, credit/purchase up to 8000 above manager approval,

4.Adequate records- invoices, good dispatched order

5. Segregation of incompatible duties- clashes between duties, more than one person responsible, handling cash and recording

6.Independent checks on performance- human error possible, fraud, account manager review subordinates work

7. Physical safeguarding of assets and records- lock the storage, security guards, authorized access