Question

What can be learned from using internal control questionnaires? How is the information used and can it reduce control risk?

Answer 1

Answer :- The internal control questionnaires show the area where weaknesses occurs or likely to occur. They do not give any idea of the importance of those weaknesses. The internal control evaluation brings to light importance of those weaknesses disclosed by ICAI.

It refers to a list of questions prepared by the auditor in respect of which the answers are to be provided by the client.

1. Internal control questionnaire incorporatestimated a large number of detailed questions, but does not attempt to distinguish their relationship materially.

2. Weaknesses are highlighted by answer " No " on internal control questionnaire.

3. Answer " No" in internal control questionnaire indicates a weaknesses real or potential, but it's significance is not revealed.

4. The " control checklist " in internal control evaluation is more than a summons key control factors, and is not substituted for internal control questionnaire.

5. Internal control questionnaire can be prepared for the following areas. Cash and bank balances, purchases, sales, payroll, Inventory, fixed assets, investment.

6. Internal contains questions which are arranged in logical and sequential manner in order to know about the working of internal control system. It consists of 3 vertical columns: column 1- Questions, column 2 - Space for answers, Column 3 - Remarks.

7. Usually the answers are provided by the client in the form of "yes" "no" or "not applicable".

8. Where the system has inherent defect the same is described in detail in the remarks column.

9. Basically, internal control questionnaire is narrative in nature. The auditor should be careful while framing the questions because if they are nothe properly related to each other they may not bring out the defects existing therein defeating the purpose of internal control questionnaire itself.

10. The main advantage of Internal control questionnaire is that it can be prepared for any system whether simple or complicated.

11. The main disadvantage is that it is highly narrative in nature.

12. Finally, the auditor has to report to the management the weakness observed by him through internal control questionnaire.