GST Course

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Internal Control & Auditors

Member (Account Deleted) Guest , 22 August 2008  
  Share


Importance of Review of Internal Control to the Statutory Auditors
OR
Duties of an Auditor with regard to Internal Control
                                             OR                                   
How does the Internal Control affect the work of an Auditor
 
 
  1. Auditor’s right to rely on internal control
 
The duty of safeguarding the assets of a company is primarily that of the management and the auditor is entitled to rely upon the safeguards and internal control instituted by the management, although he will also take into account any deficiency he may find therein while drafting his programme.
 
  1. Necessityforevaluation / Integral part of Audit Programme
 
The auditor is interested in ascertaining that transactions are executed in accordance with the management’s authorization, transactions are recorded properly, and assets are adequately safeguarded. Therefore, the examination and the evaluation of the internal control is an indispensable part of the overall audit plan.
 
  1. Audit Assurance
 
The auditor needs reasonable assurance that the accounting system is adequate and that all the accounting information which should be recorded has in fact been recorded in a correct, proper and timely manner. Internal control normally contributes such assurance.
 
  1. Audit Planning and Programme
 
The auditor should gain an understanding of the accounting system and related internal controls. He should study and evaluate the operations of these internal controls upon which he wishers to rely in determining the nature, timing & extent of his audit procedures.
 
He can formulate his entire audit programme only after he has had a satisfactory understanding of the internal control system and its actual operation. If he does not care to study this aspect, then it is very likely that his audit programme will become unwieldy and unnecessary have and the object of his audit will altogether lost in the mass of entries and vouchers.
 
  1. Role of Review
 
The review of internal control will enable the auditor to know
 
Ø      Whether error and frauds are likely to be located in the ordinary course of operations of the business.
 
Ø      Whether an adequate internal control system is in use and operating as planned by the management.
 
Ø      Whether an effective internal auditing department is operating.
 
Ø      Whether any administrative work has bear on auditor’s work. For example, when there is a weak control over worker recruitment, there is a likelihood of including dummy names in the wages sheet which is relevant to the auditor.
 
Ø      Whether the controls adequately safeguard the assets.
 
Ø      How far and How adequate is the management in discharging its functions of correct recording of a transactions is concerned.
 
Ø      How reliable the reports, records and the certificate to the management can be.
 
Ø      The extent and the depth of the examination that he need to carry out in the different areas of accounting.
 
Ø      What would be appropriate audit techniques and audit procedures in given circumstances.
 
Ø      What are the areas where control is excessive and weak
 
Ø      Whether some worthwhile suggestion can be given to improve the control system.
 
  1. Test Checking
 
In deciding upon a plan of selective checking, the existence and operation of internal control system is of great significance.



Category Audit, Other Articles by - Member (Account Deleted) 



Comments


update