Question

4. Describe the types of audit deficiencies that might arise because of problems with ICFR.

Answer 1

Control deficiency-definition

"A shortcoming in some aspects (principle, attribute, components) of the system of internal control, and no compensating controls, and has the potential to adversely affect the ability of the entity to achieve its objectives."

Audit deficiency related to ICFR

1-Testing of design of controls or operating effectiveness of control

Failure to perform sufficient procedure to test design and operating effectiveness of issuers ICFR related to loans

Failure to perform sufficient procedure to test operating effectiveness of an important management review control related to reinsurance asset

2-Top down risk based approach

Failed to check the risk of material misstatement associated with locations where there is no testing was performed and determine whether those locations presented a reasonable possibility for material misstatement

3-IT consideration

Failure to test adequately IT Controls

Failure to perform and document test of an issuers electronic data processing general and application controls in a complex environment.