Question

What is the auditor's responsibility for obtaining an understanding of internal control? What do you feel some of the best ways are to gain this understanding? How does that responsibility differ for audits of public and nonpublic companies, and how does information technology play a factor in this?

Answer 1

Solution:

The examiner's/auditor’s duty regarding getting a comprehension of inner control or a huge open organization, when a sentiments issued on the adequacy of interior controls, is altogether more noteworthy than the understanding vital when the auditor is exclusively communicating an assessment on the fiscal reports. To express a feeling on inside controls for an extensive open organization, the auditor acquires a comprehension of controls for all huge record adjusts, classes of exchanges, and revelations and related affirmations in the budget summaries. Conversely, for a review of a nonpublic organization or a littler open organization, the auditor will acquire a comprehension of inner controls that are important to the budget report review with the end goal to survey the dangers of material misquote.

Therefore, the dimension of comprehension of interior controls required for the review of inner controls surpasses the dimension required for a review of just the fiscal summaries.

12-2 Jeanne Maier, CPA, trusts that is fitting to get a comprehension of interior control about part of the way through the review, after she knows about the customer's tasks and the manner in which the framework really works. She has found through experience that rounding out inner control polls and flowcharts from the get-go in the commitment isn't advantageous in light of the fact that the framework once in a while capacities the manner in which it should.

Later in the commitment, the auditor can plan flowcharts and polls no sweat in view of the learning previously acquired on the review. Assess her methodology .Maier is right in her conviction that interior controls oftentimes don't work in the way they should.

Be that as it may, paying little respect to this, her methodology disregards the benefit of starting the comprehension of interior control by getting ready or inspecting an unpleasant flowchart or other inward control portrayals. Getting an early comprehension of the customer's inner control will give Maier a reason for a choice about further review techniques and test sizes dependent on evaluated control hazard.

By not getting a comprehension of inside control until some other time in the commitment, Maier dangers performing either excessively (costly) or too little work, or underscoring the wrong territories amid her audit.(there is an issue if either are available)