Internal Control
Inherent Limitations
1.
2.
3.
Concept of reasonable assurance
Essence of IC and its financial statement assertions
Separation of functions
Components of IC and its definitions
C
R
I
M
E
Examples of IC
-Check receipt
-Prevent diversion of customer receipts by employees
-audit procedures to detect embezzlement
Types of IC procedures
-Inventory
Foreign Corrupt Practices Act
Undestanding of an entity's internal control
-obtain knowledge about
1
2
Required documentation
Program flowchart vs Decision tables
Audit of a nonissuer
RMM & detection risks
-relationship and its meanings
Test of details
Required frequency of testing operating effectiveness of controls from past years
Sales Process and IC
-bond employees
Purchasing process and IC
Production process and IC
Payroll process and IC
Notes payable IC
Investment, marketable securities IC ex. Bearer bonds
Equipment IC
Responsibility of bank as registrar
Independent stock transfer agents
Internal auditor vs Controller
IA: requirement
Communication of IC matter to managemetn on Issuer & Non-issuer
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