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REVIEW OF CHAPTER 10
AUDITING 1
MEMBER OF GROUP:
1. LAELI SURYANI (F0313047)
. LENI PRADASARI (F031304!)
3. MAYLIA NUR"HUSNA (F03130#$)
4. MERRY ANGGITA MU"TI (F03130#%)
#. MULTININGRUM MABRUROH (F03130$$)
FA"ULTAS E"ONOMI DAN BISNIS
UNIVERSITAS SEBELAS MARET
SURA"ARTA
01#
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SECTION 404 AUDITS OF
INTERNAL CONTROL AND CONTROL RIS"
INTERNAL CONTROL OBJECTIVES
A system of internal control consists of policies and procedures
designed
to proide management !it" reasona#le assurance t"at t"e company
ac"iees its
o#$ecties and goals% &anagement typically "as t"ree #road
o#$ecties in
designing an effectie internal control system'
(% Relia#ility of )nancial reporting% &anagement is
responsi#le for preparing statements for inestors* creditors*
and ot"er users%
+% Ef)ciency and effectieness of operations% Controls !it"in a
company
encourage ef)cient and effectie use of its resources to optimi,e
t"e
company-s goals%
.% Compliance !it" la!s and regulations% Section /0/
re1uires
management of all pu#lic companies to issue a report a#out
t"e
operating effectieness of internal control oer )nancial
reporting%
&ANA2E&ENT AN3 A43ITOR RES5ONSIBILITIES 6OR INTERNAL
CONTROL
Responsi#ilities for internal controls differ #et!een management
and t"e
auditor% &anagement is responsi#le for esta#lis"ing and
maintaining t"e entity-s
internal controls% &anagement is also re1uired #y Section
/0/ to pu#licly report
on t"e operating effectieness of t"ose controls%
T!o 7ey concepts underlie management-s design and implementation
of
internal control8reasona#le assurance and in"erent
limitations%
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o R&'*'+,& A-'*/& Internal controls are
deeloped #y
management after considering #ot" t"e costs and #ene)ts of
t"e
controls%
o I*&&* L22'2* Internal controls can neer #e
completely
effectie* regard less of t"e care follo!ed in t"eir design
and
implementation%
Section /0/ 9a: of t"e Sar#anes;O
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t"e accuracy of accounting system outputs 9account #alances:
depends
"eaily on t"e accuracy of inputs and processing
9transactions:%
COSO-S INTERNAL CONTROL
T"e COSO internal control components include t"e follo!ing'
1. C*, &*2*&*
T"e control enironment consists of t"e actions* policies* and
procedures
t"at re>ect t"e oerall attitudes of top management*
directors* and o!ners
of an entity a#out internal control and its importance to t"e
entity% Tounderstand and assess t"e control enironment* auditors
s"ould consider
t"e most important control su#components'
• Integrity and Et"ical Values
Commitment to Competence Competence
Board of 3irector or Audit Committee 5articipation
. R29 '&&*
Ris7 assessment for )nancial reporting is management-s
identi)cation and
analysis of ris7s releant to t"e preparation of )nancial
statements in
conformity !it" appro8 priate accounting standard%
3. C*, '/222&
T"e control actiities generally fall into t"e follo!ing )e
types* !"ic" are
discussed ne
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#. M*22* actiities deal !it" ongoing or periodic
assessment of t"e
1uality of internal control #y management to determine t"at
controls are
operating as intended and t"at t"ey are modi)ed as appropriate
for c"anges
in conditions%
OBTAIN AN3 3OC4&ENT 4N3ERSTAN3IN2 O6 INTERNAL CONTROL
Narraties* >o!c"arts* and internal control
1uestionnaires* used #y t"e
auditor separately or in com#ination to document internal
contro'
• N''2& A narratie is a !ritten description of a
client-s internal
controls%
• F,;/' An internal control >o!c"art is a diagram of t"e
client-s
documents and t"eir se1uential >o! in t"e organi,ation%
• I*&*', C*,
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A& /*, 29 +8 ,2*92* 9&8 /*,= 2*252/'*
&52/2&*/2&= '*
'&2', ;&'9*&& '*'/2*>&,'& '-2
+?&/2&.
ASSESS CONTROL RIS@
• Assess !"et"er t"e financial statements are audita#le%
• 3etermine assessed control ris7 supported #y t"e understanding
o#tained
assuming t"e controls are #eing follo!ed%
• 4se of a control ris7 matri< to assess control
ris7
CONTROL RIS@ &ATRI
Auditors use t"e control risk matrix to identify #ot"
controls and
!ea7nesses and to assess control ris7%
o Identify transaction8related audit o#$ecties%
o Identify e
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T& 5 C*,
o T"e procedures to test effectieness of controls in support of
a reduced
assessed control ris7 are called tests of controls%
P/&-& 5 T& 5 C*,
(% &a7e in1uiries of client personnel%
+% E
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T"e auditor uses t"e results of t"e control ris7 assessment
process and
tests of controls to determine t"e planned detection ris7 and
related su#stantie
tests% T"e auditor lin7s t"e control ris7 assessments to t"e
#alance8related audit
o#$ecties%
U*&'* S&/2* 404 &-2&&* 5 '-2 &62* *
2*&*',
/*,
S&/2* 404 R&62* * I*&*', C*, :
o T"e auditor-s opinion on !"et"er management-s assessment of
t"e
effectieness of internal control oer financial reporting as of
t"e end of
t"e fiscal period is fairly stated* in all material
respects%
o T"e auditor-s opinion on !"et"er t"e company maintained* in
all material
respects* effectie internal control oer financial reporting as
of t"e
specified date%
T86& 5 O62*2*
o 4n1ualifiedo Aderse
o ualified or disclaimer of opinion
D&/2+& & 255&&*/& 2* &',-'2*=
&62*= '* &2* 2*&*', /*,
5 **6-+,2/ /6'*2&.
E',-'2*= R&62*= '* T&2* I*&*', C*, 5 N*6-+,2/
C6'*2&
(% Reporting re1uirements
+% E
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% E
