Modern Auditing Essay Example for Free

Modern Auditing Essay (Components of internal control) The chapter identified five components of internal control. Listed below are specific control policies and procedures prescribed by Suntron Company. 1. Management gives careful consideration to the requisite knowledge and skills personnel need at all levels of the organization. Control environment. Planning, executing, controlling, and monitoring and entity’s activity is what is used to develop an overall framework for an entity to meet its objectives. 2. General controls and application controls are established in the electronic data processing department. Control activities, IT should be independent and should not correct data submitted by user departments. 3. Management acts to reduce or eliminate incentives and temptations that might lead individuals to engage in dishonest or illegal acts. Control environment. Management leads by example, by demonstrating integrity and ethical behavior. 4. Management is alert to complaints received from customers about billing errors. Monitoring. Management may receive separate evaluations, such as from bank examiners. 5. Management gives special consideration to the risks that can arise from the use of information technology in the accounting system. Risk assessment. Management should consider the risk of fraud and the financial consequences that fraud presents. 6. Employees’ responsibilities are assigned so as to avoid any individual’s being in a position to both commit an error or irregularity and then conceal it. Control activiites. Inventory records should periodically be compared with inventory on hand. 7. IT management has designed controls to prevent unauthorized use of IT equipment, data files, and computer programs. Control activities. Controls that are designed to provide reasonable assurance that the recording, processing, and reporting of data by IT are properly performed for specific applications. 8. The processing of payroll includes a check on the total number of hours submitted. If more than 65 hours are reported in a weekly pay period, the transaction is printed on an exception report and put in a suspense file for additional review or additional authorization. Control activities. Computer routines that is in place to detect incomplete, incorrect, or unreasonable data. 9. Suntron’s internal audit staff periodically assesses the effectiveness of various ICS components. Monitoring. Reporting deficiencies to audit committee or full board of directors. 10. Policy manuals, accounting and financial reporting manuals, and a chart of accounts. Information and communication. Providing an understanding of individual roles and responsibilities in regards to internal control over financial reporting. have been developed and implemented. Required a. Identify the components of internal control to which each policy or procedure relates. b. For each item, identify one other policy or procedure for that internal control component that is not on the preceding list.