Essay About Auditors Overall Approach With Internal Control

Financial Statement Audits: The role of internal control

Introduction:

With this homework, we learned how the auditing plays a really important role inside a company, auditing have a really extensive application, it could applied in every department of a company and this help us to realize how a company is going.

1. - Plan the audit:

Before realizing an action or a process it’s really important to have plan, having a plan give us the tools to see better the panorama, this tools can help us to understand and analyze what we have to do. Planning an audit reduces the risk to an acceptably low level, so it’s really important to create a strategy in order to achieve the goal.

2.- Obtain an understanding of the client and its environment, including internal control:

To understand what the need is it’s important to analyze how the company is directed, we can’t change something in the outside without changing it from the inside, also, in order to achieve the goal we have to follow the steps we plan in the “

To understand what the need is provides auditors with information to assess the risks of material misstatement and with information on the types of further audit procedures that should be performed.

Examples:

• If a company wants to invest in technology but the majority of the employees are elderly people, the company also will have to invest in training for their employees.

• If a company used to make their accounting at the old way and want to introduce the SAP to their company, they have to change in a slow way, so the people that are working there can understand and follow the new way.

• If the department of human resources contract an employee with tattoos and the people that work in the company don’t used to see a person in the office with a tattoo, the business have to implement the values of having an open mind and accept the new politics of the company.

3. - Assess risks of material misstatement and design further audit procedures:

The most important point in this step is to collect the most useful information of the financial statement level and the relevant assertion.

Examples:

• When a company wants to introduce a new product to the market, they can analyze the answer of that product in other countries and compare if the needs in that country are similar to the country of origin.

• When a company changes a supplier, they have the risk that this new supplier don’t fill all the needs that the company have (number of merchandise available) thus, the company won’t be able to fill the needs of their buyers.

• When a company makes an investment in a certain product because of the weather, but the conditions of the weather doesn’t match the conditions of the product.

Ex. The company invest in umbrellas because

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