B Com Exam > B Com Videos > Auditing and Secretarial Practice > Steps for Internal Control and Audit Evaluation - Internal Audit, Auditing and Secretarial Practice
Steps for Internal Control and Audit Evaluation - Internal Audit, Auditing and Secretarial Practice Video Lecture | Auditing and Secretarial Practice - B Com
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FAQs on Steps for Internal Control and Audit Evaluation - Internal Audit, Auditing and Secretarial Practice Video Lecture - Auditing and Secretarial Practice - B Com
| 1. What is internal control and why is it important in auditing? |  |
Ans. Internal control refers to the measures and procedures implemented by an organization to safeguard its assets, ensure accuracy and reliability of financial information, and promote operational efficiency. It is important in auditing as it provides a framework for evaluating the effectiveness of an organization's processes and controls, helps identify potential risks and weaknesses, and ensures compliance with laws and regulations.
| 2. How does internal control help in preventing fraud? | |
Ans. Internal control plays a crucial role in preventing fraud by establishing checks and balances within an organization. It helps detect and deter fraudulent activities through measures such as segregation of duties, proper authorization and approval processes, regular monitoring and reconciliation of financial records, and the implementation of internal control policies and procedures. These controls create transparency, accountability, and reduce the likelihood of fraud occurring.
| 3. What are the key steps involved in evaluating internal control? | |
Ans. The key steps involved in evaluating internal control are as follows:
1. Understanding the organization's objectives, processes, and control environment.
2. Identifying and assessing the risks associated with the organization's operations.
3. Evaluating the design and implementation of internal control procedures and policies.
4. Testing the effectiveness of internal controls through sample testing, data analysis, and transactional reviews.
5. Documenting and reporting findings, including any deficiencies and recommendations for improvement.
6. Monitoring and following up on the implementation of corrective actions.
| 4. How does internal audit contribute to the evaluation of internal control? | |
Ans. Internal audit plays a vital role in evaluating internal control by conducting independent and objective assessments of an organization's processes, controls, and risk management. Internal auditors review and test the effectiveness of internal control systems, identify weaknesses or deficiencies, and provide recommendations for improvement. They also help ensure compliance with policies, procedures, and regulations. Through their evaluations, internal auditors provide valuable insights and assurance to management and stakeholders regarding the reliability and integrity of financial information and the overall effectiveness of internal control.
| 5. What are some common challenges faced in evaluating internal control? | |
Ans. Some common challenges faced in evaluating internal control include:
1. Lack of documentation: Inadequate or incomplete documentation of internal control procedures can make it difficult to assess their effectiveness.
2. Limited resources: Limited time, budget, and expertise can pose challenges in conducting comprehensive evaluations.
3. Complexity of processes: Complex organizational structures, systems, and processes can make it challenging to evaluate and understand the effectiveness of internal controls.
4. Management override: Management override of internal controls can undermine the effectiveness of the control environment and make it difficult to assess control implementation.
5. Human error and collusion: Deliberate or unintentional errors, as well as collusion among employees, can make it challenging to rely solely on internal controls for detecting fraud or irregularities.
Text Transcript from Video
activities on an ongoing basis so that's
what we talk about when we're talking
about internal controls five components
to internal controls right and what
we're going to focus on going forward is
going to be the control activities and
so when the auditor so the auditor
considers the five components of
internal controls The Closer framework
which is the established framework but
that the auditor is testing when the
auditors testing controls they're
testing the control activities so if we
if we kind of look at the phases of the
audit the first with respect to internal
controls the first phase the auditor is
obtaining an understanding and phase one
of the internal control the design in
the operation so think about the
planning phase what the auditor is doing
during the planning phases they're
talking to the client they're getting
information about the internal control
environment then in Phase two the
auditor has to assess control risk so
they'll do some walkthroughs they'll
make sure they'll test to see okay is it
operating the way that the the client
designed it or described it right so
they're looking at that and then right
they assess the control risk and phase
three if they determine if they can rely
on internal controls right they perform
and you know these tests they're going
to see they're going to select a sample
of transactions and and audit the
controls around those transactions and
then in phase four they determine okay
given my understanding of the controls
and my reliance internal controls this
is the nature of an extent of
substantive
what we talk about when we're talking
about internal controls five components
to internal controls right and what
we're going to focus on going forward is
going to be the control activities and
so when the auditor so the auditor
considers the five components of
internal controls The Closer framework
which is the established framework but
that the auditor is testing when the
auditors testing controls they're
testing the control activities so if we
if we kind of look at the phases of the
audit the first with respect to internal
controls the first phase the auditor is
obtaining an understanding and phase one
of the internal control the design in
the operation so think about the
planning phase what the auditor is doing
during the planning phases they're
talking to the client they're getting
information about the internal control
environment then in Phase two the
auditor has to assess control risk so
they'll do some walkthroughs they'll
make sure they'll test to see okay is it
operating the way that the the client
designed it or described it right so
they're looking at that and then right
they assess the control risk and phase
three if they determine if they can rely
on internal controls right they perform
and you know these tests they're going
to see they're going to select a sample
of transactions and and audit the
controls around those transactions and
then in phase four they determine okay
given my understanding of the controls
and my reliance internal controls this
is the nature of an extent of
substantive
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Nov 16, 2024 Last updated |
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