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Lecture Auditing and assurance services in Australia: Chapter 8 - Grant Gay, Roger Simnett

In this chapter, students will be able to understand: Define internal control, and explain the audit logic of assessing control risk; understand the concepts of inherent limitations and reasonable assurance with regard to internal control; describe the general objectives of internal control and how the auditor uses them to develop specific control objectives. | Chapter 8 Understanding and Assessing Internal Control 8- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Audit Strategy and Internal Control Internal control is the process designed and implemented by those charged with governance, management and other personnel to provide reasonable assurance regarding the achievement of the entity’s objectives concerning financial reporting, the effectiveness and efficiency of operations, and compliance with laws and regulations. Refer AUS 402.42/ASA 315.54 (ISA 315.42). It is designed and implemented to address business risks that threaten any of these objectives. The importance of internal control has increased as business entities become larger and more complex. Learning Objective 1: 8- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Auditor’s requirements AUS 402.41/ASA 315.52 (ISA 315.41) requires that the auditor obtain an understanding of internal control relevant to the audit. At the financial report level the auditor’s assessment of risk of material misstatement is affected by their understanding of the control environment. Refer AUS 406.05/ASA 330.10 (ISA 330.05). At the assertion level, the auditor needs to consider control risk in their assessment of the risk of material misstatement. Refer AUS 406.12/ASA 330.19 (ISA 330.12). 8- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Audit strategy To reach a conclusion on accuracy and reliability of underlying accounting data, an auditor can: Test the accounting data (substantive approach); or Perform procedures to review and evaluate the internal control to see whether . | Chapter 8 Understanding and Assessing Internal Control 8- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Audit Strategy and Internal Control Internal control is the process designed and implemented by those charged with governance, management and other personnel to provide reasonable assurance regarding the achievement of the entity’s objectives concerning financial reporting, the effectiveness and efficiency of operations, and compliance with laws and regulations. Refer AUS 402.42/ASA 315.54 (ISA 315.42). It is designed and implemented to address business risks that threaten any of these objectives. The importance of internal control has increased as business entities become larger and more complex. Learning Objective 1: 8- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant .