Auditing Assignment

ASSIGNMENT 2

QUESTION 1

i. An audit committee is largely operated by a number of non-executive directors from outside of a company who are responsible for monitoring and ensuring that internal control operates effectively.

The audit committee plays an important part in the company's financial integrity for the shareholders. As the internal auditors report to the audit committee rather than to management, those non-executive directors within an audit committee provide an independence source of assurance and objectivity of auditing work in order to enhance the financial reporting process along with corporate governance, and internal control.

ii. An audit committee may create sound communication to external auditors about the audit and control findings to ensure that the financial reporting system and resulting financial statements are free of material misstatements, clearly and transparently authored, and distributed on a timely basis.

An audit committee enhances corporate governance by reviewing risk areas and making sure those financial and non-financial risk areas are addressed by policies, insurance, or other mitigating circumstances. Finally, audit committee can insist on a regular review of enterprise risk.

An audit committee can create a climate of discipline, risk management awareness and control which will reduce the opportunity for fraud.

QUESTION 2

In the preliminary assessment of control risk, the risk has been assessed as low. As an audit, I may establish audit plan to perform a great amount of tests of control on internal control system.

However, in undertaking tests of control it is noted that the results fail to confirm the preliminary assessed level of control risk, which means control risk is assessed at high. If control risk is assessed at high, I will not undertake test of controls because I cannot place a lot of trust in the information the client gives me.

Instead, I set the level of control risk as high. By doing...