Internal Control Objectives

8/18/2019 Internal Control Objectives

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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%

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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

Documents

Internal Control Objectives