1 / 17

Directors’ and control (cont.) The COSO model for IC

Directors’ and control (cont.) The COSO model for IC. Monitoring. Communication and information. Control activities. Risk assessment. Control environment. Directors’ and control (cont.) The COSO 2 model for IC. DOCUMENTS COMPUTER controls ARITHMETIC REVIEW RECONCILIATION COUNTS

dessa
Download Presentation

Directors’ and control (cont.) The COSO model for IC

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Directors’ and control (cont.)The COSO model for IC Monitoring Communication and information Control activities Risk assessment Control environment AUD L5 A DIRECTORS' SYSTEMS

  2. Directors’ and control (cont.)The COSO 2 model for IC AUD L5 A DIRECTORS' SYSTEMS

  3. DOCUMENTS COMPUTER controls ARITHMETIC REVIEW RECONCILIATION COUNTS EXTERNAL information ACCESS Authorisation Recording Custody 'CARDCARE' 'ARC' Control Activities (Procedures) AUD L9a IC 1 INCOME CYCLE Introduction

  4. ‘Walk through’ tests • Can the ‘audit trail’ be followed (both ways)? • FS  Assertion  ETB  NL  Prime books  Source documents • Source documents  Prime books  NL  ETB  Assertion  FS AUD L6b/c SYSTEMS DOCUMENTATION

  5. ‘Walk through’ tests (cont.) • Do all recorded ‘control activities' (procedures) exist? • Examples of controls being: • An authorisation of a sale, • A check of a casting, • A reconciliation of a control a/c…  AUD L6b/c SYSTEMS DOCUMENTATION

  6. Recording systems • Narrative notes • Flowcharts • ICQ’s • Internal control questionnaires • Controls based • ICE’s / ICEQ’s • Internal control evaluation (questions) • Risk based AUD L6b/c SYSTEMS DOCUMENTATION

  7. ICQ’s • A series of questions asking if expected IC’s exist • Written so that answers indicate • if YES = a strong control • if NO = a weak control • All controls would be included • An ICQ would usually be drawn up for each income and asset cycle • The major cycles are sales, purchases, wages, cash, inventory, non-current assets AUD L6b/c SYSTEMS DOCUMENTATION

  8. ICQ’s (cont.) • All appropriate internal controls should be included in an ICQ • Each answer (yes or no) must be considered individually as (in terms of likely material misstatement) - • some controls are not as important as others • some may be irrelevant AUD L6b/c SYSTEMS DOCUMENTATION

  9. ICE’s • Rather than considering all expected IC’s, the ICE is based on the likelihood of error or fraud in each cycle • ‘Key (or control) questions’ are established • Each key question has a supporting bank of detailed questions • Some ICE’s are written so that answers indicate - • if YES = strong control • if NO = weak control AUD L6b/c SYSTEMS DOCUMENTATION

  10. ICE’s • An ICE too would usually be drawn up for each income and asset cycle • Example (Sales cycle) • Objective:Are all sales invoices recorded? • A key question in the sales cycle • Supporting question: Are invoices sequentially numbered?  AUD L6b/c SYSTEMS DOCUMENTATION

  11. Flowcharts • Organisation charts • Audit trail / information flowcharts • Document (and control) flowcharts • Systems (computer) flowcharts AUD L6b/c SYSTEMS DOCUMENTATION

  12. Flow charts for auditors - general rules • No standardisation in auditing profession • Main general rules • FLOWLINE DIRECTION • Non-standard SYMBOLS should be explained • GHOSTED SYMBOLS ( ) • NARRATIVE COMMENTARY • MOVEMENT is that of TIME (and SPACE) AUD L6b/c SYSTEMS DOCUMENTATION

  13. One dimensional flow charts • 1D charts move in time • Ideal for systems based on algorithmic logic (computers) and simple auditing charts AUD L6b/c SYSTEMS DOCUMENTATION

  14. Two dimensional flow charts • 2D charts move in time &space • Ideal for auditors, where IC evaluation is important • Each ‘function’ (ordering, sales, goods in…) is laterally placed and internal controls identified AUD L6b/c SYSTEMS DOCUMENTATION

  15. Two dimensional flow charts Time OrderingSalesWarehouseAccounts… AUD L6b/c SYSTEMS DOCUMENTATION

  16. What Does Generally Accepted Accounting Principles - GAAP Mean?The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

  17. What Does Generally Accepted Auditing Standards - GAAS Mean?A set of systematic guidelines used by auditors when conducting audits on companies' finances, ensuring the accuracy, consistency and verifiability of auditors' actions and reports.

More Related