Auditing Bits in Bytes Session 3: Internal Control Considerations

Auditing Bits in Bytes(TM) is a series of eight individual sessions that guides professionals through the complete audit process from “A to Z” - starting with Pre-Engagement Planning Activities, and going all the way through Wrap-up and Quality Control. The auditing profession is undergoing the most significant changes in modern history. Think about it. The Auditing Standards Board issued 14 new Statements on Auditing Standards all effective within two years of each other, the GAO revised Government Auditing Standards (twice!) in 2007, the PCAOB has six additional Auditing Standards related to audits of SEC “issuers” that directly influenced standards established for “non-issuers”, independence rules promulgated by all relevant standard setters have been clarified and enhanced, and Statements on Quality Control Standards for firms performing attestation services have also been revamped and strengthened. Whew! That is a lot! And to think that professionals complained about being confused before all these changes occurred!?! All professionals, both those that are new to performing financial statement audits and those with previous experience, can benefit from focused training that walks participants through the complete audit process from “A to Z”, providing practical tips and best practices for ensuring an effective and efficient financial statement audit in compliance with relevant professional and regulatory standards

Objectives:

• Session 3 of this eight-part series focuses on important internal control considerations. This includes both evaluating the design and implementation of internal controls, which is required on all engagements. It also includes testing controls for operating effectiveness, which should be considered as part of the risk assessment procedures. This area is one of the most commonly misunderstood and misapplied aspects of the audit process, particularly given the recent significant changes in auditing standards. Inappropriate or inadequate judgment calls made at this stage of the engagement could have the greatest impact on financial statement audit effectiveness and efficiency. Missteps in this area also have the greatest likelihood of being identified as deficiencies in peer or regulatory review.

Major Topics:

• Evaluating Design-Implementation of Internal Controls
• Typical types and flow of an internal control system
• Documenting an understanding of the design of internal control, including both entity-level and transactional-level
• Identifying the key controls that significantly reduce the possibility of material misstatement due to fraud or error
• Appropriately verifying that key controls have been implemented
• IT control considerations, including general and application controls
• SAS 70 special considerations
• Testing Controls for Operating Effectiveness
• What audit evidence is required to reduce control risk below high
• Understanding when a control reliance strategy may be either necessary or desirable in an audit plan
• Impact of reduced control risk on the nature, timing and extent of substantive audit procedures
• Relationship of Internal Controls Testing Concepts to Compliance Testing - Differentiating the purpose and requirements related to these two different procedures

Developed and offered by the Business Learning Institute.
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