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Hello,
I came accross this question: “Evaluate internal control components, including deficiencies and significant deficiencies in internal control.” It is from a video on ACCA official YouTube account. I obviously know what are internal control components, but am unsure what is meant by their evaluation.
Also, do you know what is the difference between deficiencies in internal control components and significant deficiencies in internal control?
Many thanks
Frantisek
Evaluation means make a judgement on, so you would go through the components of IC and comment as best you can. For example, how good is the control environment etc.
ISA 265 definitions:
(a) Deficiency in internal control – This exists when:
(i) A control is designed, implemented or operated in such a way that it is unable to prevent, or detect and correct, misstatements in the financial statements on a timely basis; or
(ii) A control necessary to prevent, or detect and correct, misstatements in the financial statements on a timely basis is missing.
(b) Significant deficiency in internal control – A deficiency or combination of deficiencies in internal control that, in the auditor’s professional judgment, is of sufficient importance to merit the attention of those charged with governance.
So more minor deficiencies would be communicated to management, but significant deficiencies would be communicated to the board.
For the purposes of F8 questions, you can lump them all together and comment on ant deficiency you identify.
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