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The Role of Internal Controls in Audit Effectiveness and Risk Assessment

Description: This assignment discusses how internal controls enhance audit effectiveness and manage risks.

Olivia Smith
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The Role of Internal Controls in Audit Effectiveness and Risk AssessmentWeek 3–DQ 2Why do auditors have to consider the internal controls of the organization? What aresome key elements of internal control? Which are the most important? How will theauditor have to modify the audit program if the internal controls are deemedinadequate to support management assertions?Response #1Auditors have to consider an organizations internal control so the audit will be effective,efficient, and so they will have awareness of where misstatements might occur. An auditormust understand the procedures and policies and the length of operation per eachcomponent of internal control; control environment, risk assessment, information andcommunication, control archives, monitoring, and antifraud programs and control.The key elements of internal control are:1.Identify the types of potential misstatements that may occur2.Understand the factors that affect the risk of material misstatement3.Design further audit procedures (Boynton and Johnson, 2006, p. 422).The most important of the elements is designing further audit procedures. The first twoelements feed to the point, they will tell if the auditor has adequate information to assessmaterial misstatement per management’s assertions. The audit program would bemodified if the auditor finds inadequacies within any of the internal control components.For an example, if there is no supporting documentation in the control archives (log bookor some sort of tracking), how would the organization know they have accurately archivedall files correctly and to 100% of their item list. The auditor would have to conduct more

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Accounting

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