INTERNAL CONTROL AND CONTROL RISK 0 GOOD INTERNAL CONTROL PREVENTS MORE DEFALCATIONS THAN GOOD AUDITORS FIND Arens, Loebbecke; Auditing, 8/E
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. 10 INTERNAL CONTROL AND CONTROL RISK GOOD INTERNAL CONTROL PREVENTS MORE DEFALCATIONS THAN GOOD AUDITORS FIND
Importance of Control Risk Lower Less Control risk Evidence Arens, Loebbecke; Auditing, 8/E
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Importance of Control Risk Lower Control Risk Less Evidence
Basic Concepts a Managements responsibility 「 Reasonable assurance a Inherent Limitations Reliability of Financial Reporting a Efficiency and effectiveness of operations Compliance with Applicable Laws and Regulations Controls Related to Reliability of Financial Reporting Controls over Classes of Transactions Arens, Loebbecke; Auditing, 8/E
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. ¶ Management’s Responsibility ¶ Reasonable Assurance ¶ Inherent Limitations ¶ Reliability of Financial Reporting ¶ Efficiency and Effectiveness of Operations ¶ Compliance with Applicable Laws and Regulations ¶ Controls Related to Reliability of Financial Reporting ¶ Controls over Classes of Transactions
Elements of the Control Structure 1. Control Environment 2. Managements Risk Assessment 3. Accounting System 4. Control Activities 5. Monitoring Arens, Loebbecke; Auditing, 8/E
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. 1. Control Environment 2. Management’s Risk Assessment 3. Accounting System 4. Control Activities 5. Monitoring
Components of Internal Control Integrity and ethical values Commitment to Competence Board of Directors of Audit Committee Participation Managements Philosophy and operating Style Organizational Structure Assignment of Authority and responsibility Human resources policies and practices Arens, Loebbecke; Auditing, 8/E
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Components of Internal Control Organizational Structure Commitment to Competence Board of Directors of Audit Committee Participation Management’s Philosophy and Operating Style Integrity and Ethical Values Assignment of Authority and Responsibility Human Resources Policies and Practices