ISSUES IN AUDITING AND ASSURANCE SERVICES

Issues in Auditing and Assurance Services



Issues in Auditing and Assurance Services

COSO - Internal Controls (coso.org)

Describe the five components of internal control.

Report that COSO published in year 1992 describe the basis for developing business control system and assessing their effectiveness. There are five primary components of internal control are describe below

Control Environment

It is relates to organization control people in consciousness way. It is generally controlling all the major internal components of the organization.

Risk Assessment

It based on analysis, identification and risk management that relate to preparation of financial management in order to ensure that it completes generally accepted principles of accounting (GAP)

Control activities

It relates to policies and procedures of organization that address potential risk occur to meet organization objectives.

Communication and information

It focuses on the quality of information that needs to run business control in an effective way and system requirements to develop and processes such information.

Monitoring

It involves the effectiveness of organization internal control. It involves assessing compliance, operational control and design with policies and procedures. It also involves implementation of appropriate action when required.



Explain the three categories of objectives.

There are three categories of objectives that are involved operation, reporting and compliance

Operation objectives

Operation objective relates to primary mission and fundamental reason for their existence. This objective merely based on the choice of management that relates to industry consideration, structure and entity performance. Entity objective is also related to sub-objectives for operation within the operating units, divisions, subsidiaries and functions that enhance the efficiency and effectiveness in movement of entity towards its ultimate goals.

Operation objectives might relate to improve the productivity, financial performance, innovation, environmental policies and satisfaction of employees. Governmental agency might focus on executing its spending in line with the operation objectives that are clearly specified or well conceived.

Reporting objectives

Reporting objectives pertain the preparation of reports that used by organizations. This objective might relate to both financial and non financial and internal or external reporting. Internal objectives driven by the internal requirements that helps an organization to make a strategic decision on various levels. While objectives of external reporting driven by standards established by regulators and standard setting bodies.

Compliance objectives

It includes specific actions with laws and regulations. The organization is basically needed to understand that which rules, laws and regulation need to apply. There are generally a well known rules and regulation relating to the human resources, environmental compliance, taxation and others that might be more obscure. The organization expected to incorporate the standards into objectives set for entity.



Why is internal control described as a process?

Internal control is describing as a process because of its effectiveness is a condition or state of the process at one or more points in a single time. It is also dynamic and interactive process action that permeates entity activities that inherent the way management processes their business operations effectively and efficiently. Internal control is efficient when it embedded entity's infrastructure and ongoing activities.

Which should come first; internal controls or business objectives?

Internal control should come first ...