Chap003-LN

Chap003-LN - Chapter 03 Internal Controls CHAPTER 03...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 03: Internal Controls CHAPTER 03: Internal Controls After studying this chapter, you should be able to: 1. Understand management's use of internal controls to achieve financial statements prepared in accordance with an applicable financial reporting framework. 2. Describe the auditor's responsibility for internal controls in audits of financial statements and audits of internal controls over financial reporting. 3. Explain the auditor's requirement for performing tests of controls in an audit of financial statements. 4. Understand how the auditor gathers sufficient appropriate evidence when the client uses a service organization. 5. Describe how the auditor tests internal controls. 6. Discuss dual-purpose tests. 7. Describe the auditor's reporting requirements for internal control deficiencies in a financial statement audit. 8. Explain internal controls over financial reporting. 9. Describe the auditor's reporting requirements for internal control deficiencies and material weaknesses in an audit of internal controls over financial reporting. 10. Understand the role of internal controls in the corporate governance process. Chapter 3: Internal Controls Chapter Highlights This chapter provides thorough coverage of internal control topics including management’s responsibility for establishing controls and the coverage of the components of internal control. Most of the chapter is devoted to the auditor’s responsibility for internal control over financial reporting including the testing of controls, determining the effectiveness of the controls and then reporting on the effectiveness of the controls in an integrated audit. Once you’ve had the chance to evaluate the relevant definitions and standards in the chapter, a detailed “Mystery Bookstore Example” is a good illustration of the identification and testing of controls in the revenue and inventory accounts. This walk-through should assist you in understanding the processes involved and determine the potential for likely misstatements and is a valuable exercise. Pay attention to the many examples of letters and documents throughout this chapter. Examples of a Written Report on Significant Deficiencies or Material Weaknesses and a Management Letter are shown in Exhibit 3-4 and Exhibit 3-5, respectively. The actual Management Report on Internal Control from Hewlett Packard and Goodyear Tire and Rubber Company are reproduced in Exhibit 3-6 and Exhibit 3-7. Additionally, Exhibit 3-9, Exhibit 3-10, and Exhibit 3-11 present examples of integrated audit reports for Hewlett-Packard and Hecla Mining Company. Chapter Outline 1. The Impact of Internal Controls on Financial Statements (Slide #1… see companion slides) Auditing Standards define internal controls over financial statements as processes designed by management and others charged with governance to provide reasonable assurance that company’s responsibilities in three areas are met: 1.1.The reliability of financial reporting 1.2.The effectiveness and efficiency of operations
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/03/2011 for the course HIST 101 taught by Professor M during the Spring '11 term at NJIT.

Page1 / 8

Chap003-LN - Chapter 03 Internal Controls CHAPTER 03...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online