Auditing and Internal Control Issues

Author: Pat Patterson

This course will review internal control from the Auditor's point of view which is to study and evaluate the system of a client's internal control. To obtain an adequate understanding of the internal control system, that must be tested, the Auditor must determine whether audit is possible, if yes, then he/she should determine the scope of the audit.

The coronavirus pandemic (COVID-19) has raised several questions about how to properly audit financial statements when internal controls have changed due to dramatic changes in an entity's business volume and activities.

The auditing standards (GAAS) require the auditor to obtain an understanding of controls that are relevant to the audit and assess whether they are designed effectively to prevent or at least detect and correct material misstatements that might be made in the financial statements. Then the auditor is required to determine whether they've been implemented. Please note that this course considers audits performed under generally accepted auditing standards (GAAS) and not audits under PCAOB or IAASB standards. New standards will be dealt with and explained for internal controls, technology, and professional skepticism.

GAAS requires auditors to identify where and how the financial statements may possibly carry a higher risk of being materially misstated. The auditor uses that understanding to help design what further audit procedures might be effective in detecting any material misstatement that may exist.

Those further audit procedures can either be tests of controls or substantive audit procedures. It is important in this environment for auditors to be creative and innovative in their audit approaches. That may involve performing procedures remotely, and it is predicated on understanding how the client is processing and controlling its financial accounting processes and working transactions through the financial statements.

The auditor needs to understand the entity's internal control before determining whether procedures that might be performed remotely would truly be effective.

Publication Date: June 2023

Designed For
A CPA professional who is auditing an entity, someone in an entity’s internal audit section, management that is responsible for an internal control system, and anyone else who needs to know the details and importance of internal control.

Topics Covered

• Update on Internal Controls and AICPA Auditing Standards
• Update on Internal Control and audit reports
• Update on New Quality Management standards approved by ASB
• Internal control, COVID-19 Issues, and other related matters

Learning Objectives

• Identify how the control environment may have changed because of the pandemic
• Identify how to use technology in the changed or changing environment
• Recognize how to use professional skepticism in the new environment
• Recognize how to communicate significant deficiencies or material weaknesses in internal control
• Recognize consideration for clear thinking and professional skepticism in the inquiry process to obtain sufficient appropriate audit evidence

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Auditing (2 hours)

Program Prerequisites
Basic understanding of GAAS.

Advance Preparation
None