ch 10 auditing
DESCRIPTION
ppt auditingTRANSCRIPT
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CHAPTER 10UNDERSTANDING INTERNAL
CONTROL
I Putu Wibaksha Aditya P. 125020307121027Putri Ayu Dwi Lestari 125020307121011
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Chapter 10 Overview
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Components of Internal Control
• Control Environment
• Risk Assessment
• Control Activities
• Information and Communication
• Monitoring
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Entity Objectives with Internal Control• Reliability of financial information
• Compliance with applicable laws and regulations
• Effectiveness and efficiency of operations
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Limitations of Internal Control
• Mistakes in Judgment
• Breakdowns
• Collusion
• Management Override
• Cost versus Benefits
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Roles and Responsibilities• Management
• Board of Directors and Audit Committee
• Internal Auditors
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Roles and Responsibilities (cont.)
• Other Entity Personnel
• Independent Auditors
• Other External Parties
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Study Break1. _____ is a process that assesses the quality of internal
control performance over time. A. Control activitiesB. Risk assessmentC. Information and communicationD. Monitoring
D. Monitoring
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Study Break
2. This limitation of an entity’s internal controls occurs when two or more individuals act together to perpetrate and conceal fraud.
A. BreakdownsB. CollusionC. Management overrideD. Mistakes in judgment
B. Collusion
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Components of Internal Control
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Control Environment• Integrity and Ethical Values
• Commitment to Competence
• Board of Directors and Audit Committee
• Organizational Structure
• Human Resource Policies and Practices
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Risk Assessment Process
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Information and Communication
• Information• Transactions• Audit Trail or Transaction Trail• Documents• Records
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Control Activities• Authorization Controls
• Segregation of Duties
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Segregation of Duties
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Control Activities (cont.)• Information Processing Controls• General Controls
• Computer Application Controls
• Controls over the Financial Reporting Process
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Computer Application Controls
• Input Controls
• Processing Controls
• Output Controls
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Controls over the Financial Reporting Process
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Antifraud Programs and Controls
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Study Break
3. Which of the following does not influence the control environment?
A. Management’s PhilosophyB. Adequate TrainingC. Hiring ProcessesD. All of the above influence the control
environment
D. All of the above influence the control environment
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Study Break
4. This component of control activities ensures that every transaction is authorized by management acting within the scope of their authority.
A. Authorization ControlsB. Segregation of DutiesC. Information Processing ControlsD. All of the above
A. Authorization Controls
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Study Break
5. This computer application control is designed to ensure that the processing results are correct and only authorized personnel receive the information.
A. Input ControlsB. Processing ControlsC. Output ControlsD. Data Controls
C. Output Controls
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Understanding Internal Control
Must perform procedures to:
• Understand design of policies and procedures
• Determine whether the policies and procedures are operating
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Understanding Internal Control
Auditor uses the understanding to:
• Identify types of potential misstatements
• Understand factors affecting risk of material misstatement
• Design further audit procedures
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Documenting the Understanding
• Questionnaires
• Flowcharts
• Decision Tables
• Narrative Memoranda
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Questionnaire
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Decision Table
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Narrative Memoranda
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Study Break
6. All of the following are procedures used to obtain an understanding of internal controls except:
A. Inspecting documentsB. Inquiries of client’s customersC. Inquiries of managementD. All of the above procedures are used
B. Inquiries of client’s customers
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Study Break
7. This form of documentation is a diagram that uses symbols to identify the steps involved in processing information through the accounting system.
A. QuestionnaireB. FlowchartC. Decision TableD. Narrative Memoranda
B. Flowchart
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T H E E N D LET’S CONTINUE TO CHAPTER 11