Question

Ch.11 Discussion topic As you probably read in the chapter as well as in my ch.11 lecture notes, understanding the control risk assessment flow chart would be crucial not only for studying ch.11 Internal Control Assessment topics, but also would be critical to have a solid conceptual framework for the entire audit process. In your own words and understanding, list and explain briefly the phases/ steps of a control evaluation of a client's internal control system-it's design, placement, and operating effectiveness of their internal control system, and how to incorporate auditors' control risk assessment result** into audit plan (substantive audit testing plan). Please begin with the first step: "understanding your client internal control structure" for first time as a new client, and finish as the last step: "developing audit strategy/ audit program (meaning; designing your audit procedures with determining the nature, extent, timing of audit testing plan). **result from tests of controls performed by auditors (only if they have performed) and result from auditors' assessed control risk steps. Remember ?: N-E-T (Nature, Extent, Timing)

Answer 1

Evaluation of Internal controlna. An evaluation of client internal system involves on enamination of the effectivene of an organisations system of internal controls. - By engaging in this evaluation, au auditor can determine the entent of other tents that must be performed in order to arrive at an opinion regarding fairness of entity's financial statements - Auditou are specifically eupected to understand control that addrenx. "orgnificant rifles. - control activities may vary depends on client's size, compleuity & nature of operations. Steps involved Pn the Evaluatiow peoces na- © Determine the entent and types of control & being used by the clenti ② Determine which of these controls the auditor intends to rely opou. 3 Baped on above steps , determine which audit procedures should be expanded corn reduced Based on evaluation of internal contool system itor can determune nature, tining and entent audit procedures to be performed. Con Additional audit peocedures. auditor