How Is the Auditors' Understanding of the Client's Internal Control Documented in the Audit Working Papers

Research Assignment #3 (7.5 pts. each for 30 pts.)(Due Thurs., March 17)

1) How is the auditors' understanding of the client's internal control documented in the audit working papers? Textbook pg. 290, Question 7-18

According to per page 267 of the Whittington textbook, as the external auditors obtain a working knowledge of internal control, they should document the information in their working papers. The form and extent of this documentation is affected by the size and complexity of the client, as well as the nature of the client’s internal control. The documentation usually takes the form of internal control questionnaires, written narratives, or flowcharts

2) The definition of internal control is contained in COSO’s Internal Control-Integrated Framework and the professional standards are quite broad and comprehensive. Textbook pg. 290, Question 7-25

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| a) Define internal control and its purpose. b) Explain the major concepts that are included in the definition of internal control. c) List and describe the five components of internal control. d) Identify the major limitations of internal control.a) The PowerPoint slide 7-2 defines that internal control is a process, effected by the entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding, achievement of (the entity’s) objectives relating to: 1)Reliable Financial Reporting 2)Effectiveness and Efficiency of Operations3)Compliance with applicable laws and regulationsb) Per page 250 of the Whittington textbook explains the major concepts that are included in the definition of internal controlInternal control is a process, or a means to an end, and not an end in and of itself. The process is effected by individuals, not merely policy manuals, documents, and forms. By including the concept of reasonable assurance, the definition recognizes that internal control cannot realistically provide absolute assurance that an...