auditingch5-7a.docVIP

5.58 Internal Control Audit Standards (AICPA solution) a. In planning an audit, an auditors understanding of the internal control components should be used to identify the types of potential misstatements that could occur, to consider the factors affecting the risk of material misstatement, and to influence the design of substantive procedures. b. An auditor obtains an understanding of the design of relevant internal control procedures (policies and procedures) and whether they have been implemented. Assessing control risk below the maximum level further involves identifying specific control procedures (policies and procedures) relevant to specific assertions that are likely to prevent or detect material misstatements in those assertions. It also involves performing tests of controls to evaluate the operating design and effectiveness of the clients control procedures. c. When seeking a further reduction in the assessed level of control risk, an auditor should consider whether additional audit evidence sufficient to support a further reduction is likely to be available, and whether it would be efficient to perform tests of controls to obtain that audit evidence. d. An auditor should document the understanding of a clients internal control system components to plan the audit. The auditor also should document the basis for the conclusion about the assessed level of control risk. If control risk is assessed at the maximum level, the auditor should document that conclusion and the reasons for it. However, if the assessed level of control risk is below the maximum level, the auditor should document the basis for the conclusion that the effectiveness of the design and operation of internal control procedures supports that assessed level. 5.59 Audit Simulation: Segregation of duties Abigail Bryan Chris 1. Reconcile bank account 2. Open mail and list checks 3. Prepare checks for signature 5. Maintain personnel records 6. Prepare deposit and take to bank 4. P