Internal Controls Concept of Auditing | Assessment

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Added on 2019-09-30

Internal Controls Concept of Auditing | Assessment

Added on 2019-09-30

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Assessment 3[Type the document subtitle]Student Name: Student ID: Course Name: Course ID:Faculty Name: University Name:

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Answer 1: Internal ControlsConcept of auditing traditionally has evolved. It has evolved from auditing to audit andassurance. Traditionally auditing involved vouching, sample tests and compliances. But nowthe scope of audit has extended to assurance. It implies assuring the clients that the Internalcontrols are in order (Shaub, 1995). Internal controls have direct co-relation with theorganization’s operational effectiveness, reliability in financial reporting, compliances withall applicable statutory laws & regulations and policies laid down by management. A veryinteresting update in the field of auditing has emerged in the form of reporting the InternalFinancial Controls over and above Financial Reporting. These are guided by the Institutegoverning the Chartered accountancy course. This scope of enhancement has increased morereliability to the stakeholders and revenue authorities about the financial statements andreporting requirements. Lists of checkpoints have been recommended by the governingbodies which cover all the ins and outs of the organization irrespective of the industrydomain.There are 4 basic components of internal control1.Operational effectiveness: Auditor must ensure that the operations are carried outeffectively in the way it is expected. Revenue leakages and over / under absorption ofoverheads are controlled and closely monitored. The budgets laid out by themanagement are rational enough to be followed by the Company 2.Reliability in financial reporting: there should not be irregularity in usage ofaccounting heads, significant accounting policies and the same should be followedconsistently without deviation. If the same requires deviation, it should be approvedby the top management (Doyle et al, 2007). General assurance should be provided forthe financial reporting discipline.

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