When considering a client's internal control, the auditors focus on its various characteristics. For each of the following characteristics indicate the auditors' responsibility under generally accepted auditing standards and the procedures used to meet that responsibility.a. The design of internal control. b. Controls have been implemented (placed in operation). c. The operating effectiveness of controls.

Question

What will be an ideal response?

Answer 1

a. The auditors have a responsibility to obtain an understanding of internal control that is sufficient to plan the audit. An understanding of the design of the structure is obtained by inspecting control manuals, organization charts, and job descriptions, and by interviewing client personnel.

b. The auditors have a responsibility to determine whether significant internal control policies and procedures are implemented (placed in operation) in every audit. The auditors may determine whether the controls have been implemented (placed in operation) by observation, inspection, and inquiry. Walk-through tests may also be used.

c. The auditors have a responsibility to determine the operating effectiveness of controls that provide the basis for the auditors' assessment of control risk at levels below the maximum. The auditors use observation, inspection, inquiry, and reperformance to test the operating effectiveness of controls.