Auditors are required to obtain a sufficient understanding of an entity's internal control. This understanding is...

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Auditors are required to obtain a sufficient understanding of an entitys internal control. This understanding is required by

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Answer 1

Answer #1

Some of the goals (purposes) for conducting an evaluation of an entity's internal control are:

1. It involves an examination of the effectiveness of an organization's system of internal controls

2. The auditor can determine the extent of other tests that must be performed in order to arrive at an opinion regarding the fairness of the financial statements of the entity.

3. It reduces the risk of fraudulent activity which moderates the need for additional procedures of audit.

It also concentrates on below issues

1. Separation of duties

2. Checks and balances

3. Safeguarding of records

4. Employees trainibg level and competence

5. Effectiveness of the entity's internal audit function

The auditors determine the types of control and extent to which these controls are used by the client and then decide which of these controls they can rely upon. Then decide on which audit procedures should be expanded or reduced and make recommendations to improve the internal controls.

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Answer 2

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