d What is the independent auditors principal purpose for obtaining an

D what is the independent auditors principal purpose

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d. What is the independent auditor’s principal purpose for obtaining an understanding of internal control and assessing control risk in a financial statement audit? o(1) To comply with generally accepted accounting principles. o(2) To obtain a measure of assurance of management’s efficiency. o(3) To maintain a state of independence in mental attitude duringthe audit. o(4) To determine the nature, timing, and extent of subsequent audit work. 10-33 (Objective 10-3)Following are descriptions of ten internal controls.1. The company’s computer systems track individual transactions and automatically accumulate transactions to create a trial balance. CONTROL ACTIVITIES/INFORMATION AND COMMUNICATION 2. The company must receive university transcripts documenting all college degrees earned before an individual can begin their first day of employment with the company. CONTROL ENVIRONMENT 3. Senior management obtains data about external events that might affect the entity and evaluates the impact of that information on its existing accounting processes. RISK ASSESSMENT 4. Each quarter, department managers are required to perform a self- assessment of the department’s compliance with company policies.
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Reports summarizing the results are to be submitted to the senior executive overseeing that department. 5. Before a cash disbursement can be processed, all payee information must be verified by matching the payee to the company’s approved vendor listing. 6. The system automatically reconciles the detailed accounts receivable subsidiary ledger to the accounts receivable general ledger account on daily basis. 7. The company has developed a detailed series of accounting policy and procedures manuals to help provide detailed instructions to employees about how controls are to be performed. 8. The company has an organizational chart that establishes the formallines of reporting and authorization protocols. 9. The compensation committee reviews compensation plans for seniorexecutives to determine if those plans create unintended pressures that might lead to distorted financial statements. 10. On a monthly basis, department heads review a budget to actual performance report and investigate unusual differences. MONITORINGRequired Indicate which of the five COSO internal control components is best represented by each internal control.
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