Week 6

Question 1

Internal control defined

Answer 1

Internal control encompasses the entity’s resources, systems, processes, culture, structure and tasks.
When controls are effective, the entity is more likely to achieve its strategic and operating objectives.
The auditor focuses on controls with a direct impact on the entity’s financial reporting, compliance and asset safeguarding

Question 2

Entity-level internal controls

Answer 2

Entity level internal controls potentially impact all entity processes. 
Comprises: 
1. control environment
2. entity’s risk assessment process
3. IT and communications systems
4. control activities
5. monitoring of controls.

Question 3

Transaction-level internal controls

Answer 3

These controls impact a particular transaction, or group of transactions.
They are aimed at preventing an error from entering the records, or detecting errors that do enter the records.

Question 4

Transaction-level internal controls

Controls are considered for transaction processes or flows, for example:

Answer 4

sales process

cost of sales process.