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Internal Control – ACCA Audit and Assurance (AA)

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  5. Good Morning,
    direct controls are involved to prevent, detect and correct misstatements. But is it a management’s responsibility to prevent detect and correct misstatements? The auditor is not responsible for that.
    I probably have not catched something…..
    Thank you in advance

  6. Does “bypass of controls” refer to ignoring the normal chain of command within the entity? In my experience of working in companies, in emergencies that chain of command isn’t usually ignored. Rather the control process gets abbreviated, eg with a quick phone call to a director who then gives verbal authority to proceed. If the company has a document that says “in emergencies please seek verbal approval to proceed from a director, to be followed up by written approval confirmation as soon as possible afterwards”, do we as auditors view that as a bypass of control?

  8. Hi. I am a bit confused about how internal audit can provide in internal control and risk management areas. If internal audit when looking at the internal controls it does not manage risks at the same time? Is there something additional it provides to the risk management area other than reveiwing internal controls and compliance with regulations?

    • Financial internal control is just one area of risk management. Aspects of business risk management would basically involve internal audit looking at all significant business risks (which are not examinable in AA) and whether management has controls in place to ensure that the risks that the business is taking on is in keeping with its risk appetite so the business is not exposed to risks that may cause it to fail. Internal audit does not IMPLEMENT policies and procedures but reviews, tests and monitors them – so will make recommendations to management/TCWG – but it will be up to management/TCWG to implement those recommendations.

    • Both.

      If you are testing that a control such as monthly bank reconciliatilns is taking place, you have to recalculate/reperform at least one to ensure it is done correctly and that the control is effective.

      At year end you would also reperform/recalculate the bank rec to give substantive evidence that the cash balance is correct.

      Similarly, enquiry/confirmation, inspection and observation can all be used for tests of control anf for substantive tests. Analytical procedures can be used only for substantive tests.

      • Good Morning,
        I do not really understand the difference between reperformance and recalculate in practice. I think they are synonyms.
        If I reperform the bank reconciliation, I am recalculating it as well….no?
        Thanks

  17. Hello, I am a bit confused about one part of the lecture. When you talk about recording and assessing the accounting system, it is the auditor who is supposed to do this, right? Or is it done by the client and then checked by the auditor?

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