Why do auditors have to consider the internal controls of the organization? What are some key elements of internal control Answer

Why do auditors have to consider the internal controls of the organization? What are some key elements of internal control? Which are the most important? How will the auditor have to modify the audit program if the internal controls are deemed inadequate to support management assertions?

 

The control environment represents the tone set by management of an organization that influences the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure.

A strong control environment comprises numerous factors that work together to enhance the control consciousness of people who implement controls throughout an entity. Among these are the following (AU 319.25):

■ Integrity and ethical values

■ Commitment to competence

■ Board of directors and audit committee

■ Management’s philosophy and operating style

■ Organizational structure

■ Assignment of authority and responsibility

■ Human resource policies and practices

I think the integrity and ethical values are the most important because ethics will make the business more successful, “ethics pay—that ethical behavior is good business.”