Internal Control Audit Standards

1079 WordsJun 11, 20135 Pages
Jurgen Skembi Homework5 Internal Control Audit Standards a. For what purposes should an auditors’ understanding of the internal control components be used in planning an audit? An auditors’ understanding of the internal control components should be used for 3 reasons: a) To identify the potential misstatement that might occurs b) To identify the factors that affect the risk of material misstatement c) To influence the design of substantive procedures b. What is required for an audit team to assess control risk below the maximum level? It is required for an audit team to assess control risk below the maximum level to identify specific control procedures and policies relevant to specific assertions that…show more content…
If the scope limitation is due to inability to gather sufficient evidence regarding to potential material weaknesses, it is necessary to include the definition of the material weakness as well. d) Modify the opinion paragraph, by stating that “the scope of our work was insufficient to enable us to express an opinion, so we don’t express an opinion”. c. Other auditors have audited a significant component of the company, including internal control over financial reporting relating to the component. If the auditors conclude that the internal control over financial reporting is not maintained effectively by management, auditors should express an unqualified opinion on management’s assessment of internal control over financial reporting. On the other hand, an adverse opinion should be issued on the effectiveness of the company’s internal control over financial reporting. ▪ The modification that are needed to be made: a) Modification of introductory paragraph, stating that the management’s assessment didn’t maintain an effective internal control over financial reporting. b) Adding a paragraph that defines any material weakness identified during the audit. c) Modification of opinion paragraph, stating that because of the effect of the material weaknesses captured, the company has not maintained an effective internal control over financial reporting. d. The auditors believe that the entity’s management has
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