Why an auditor needs to obtain an understanding of internal control relevant to the audit?

In all audits, the auditor should obtain an understanding of internal control sufficient to plan the audit by performing procedures to understand the design of controls relevant to an audit of financial statements and determining whether they have been placed in operation.

Why is it important that auditors determine if the client is complying with debt provisions?

A likely reason that consideration of client compliance with debt provisions is important to an audit is that violation of such debt provisions may affect the total recorded: current liabilities. A transfer agent and a registar are most likely to provide the auditor with evidence on: shares issued and outstanding.

Why obtaining an understanding of the entity and its environment is important for the auditor?

In all audits, the auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or to fraud, and to design the nature, timing, and extent of further audit procedures.

When auditing a company the auditor should obtain an understanding of internal control sufficient to?

internal control,3 the auditor should obtain an understanding of the internal audit function sufficient to identify those internal audit activities that are rel- evant to planning the audit. The extent of the procedures necessary to obtain this understanding will vary, depending on the nature of those activities.

How does auditor evaluate internal controls?

Auditors often test a company’s internal controls by reviewing operational information. Testing internal controls relates to the company’s financial accounting department as a rule. Auditors select a sample of information and test it against the company’s standard operating procedures or national accounting standards.

Why does an auditor need to understand the client business?

Auditors need an understanding of the client’s business and industry because the nature of the business and industry affect business risk and the risk of material misstatements in the financial statements. Auditors use the knowledge of these risks to determine the appropriate extent of further audit procedures.

Why does the auditor identify risks during the first phase of the audit?

The risk assessment phase of a financial report audit helps the audit team identify the risks which could contribute to a material misstatement, and thus help identify the audit procedures that are most appropriate to the client’s characteristics and situation.

When obtaining an understanding of an entity’s internal controls An auditor should concentrate on their substance rather than their form because?

The auditor should concentrate on the substance of managcmcnt’3 policies, procedures, and related actions controls rather than their form because management controls may be established appropriate policies and procedures but not acted upon.

How does an internal audit vary from an external audit Why are internal audits so important?

The internal audit function is preventative and ongoing, providing insights and suggestions to management encompassing all governance, risk, and control processes, whereas an external financial audit tends to happen annually, or least once every five years, with a scope limited to financial statements.

When assessing internal auditors objectivity An auditor should?

When assessing internal auditors’ objectivity, an independent auditor should: consider the policies that prohibit the internal auditors from auditing areas where they were recently assigned. Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

Why do auditors assess the quality of internal control?

The objective of the auditor is to identify and assess the risk of material misstatement, whether due to fraud. It includes understanding the entity and its environment and the entity’s internal controls in order to design the proper audit procedures to achieve the desired level of assurance.

Do auditors verify the effectiveness of internal controls?

The auditor must test those entity-level controls that are important to the auditor’s conclusion about whether the company has effective internal control over financial reporting.

What is the purpose of an internal audit?

These audits can assist in monitoring the system and checking that the it is meeting conformance and standards. The goal of an internal audit is to gather information about the effectiveness of the quality system. As the name implies, an internal audit is performed by someone within the company.

What are the advantages of internal check to the statutory auditor?

From the Auditors Point of View. Due to efficient system of Internal Check, the statutory Auditor can avoid deep and detailed checking of transactions. He may rely on test checks, hence Internal Check provides convenience to Auditor.

What are the responsibilities of external auditors?

External auditors have no responsibility to the organization other than determining the accuracy of annual financial statements. What Happens During an Internal Audit?

What are the key points to consider when carrying out an audit?

When the audit is being undertaken, the following points should be considered: 1. An opening meeting with the auditee (s) to explain that the internal audit will verify the effectiveness and efficiency of the organisation’s processes, including evidence of continual improvement, for example, by auditing: