ACT 514
Answer the following questions in your own words.
1.
There are a few objectives of internal control. Among the objectives, which objective does
'auditing' concern? (8 points)
The objective that 'auditing' is only concerned about is to form and express an opinion
on the effectiveness of the organization's internal control whether they are effective at
minimizing risk or protecting assets.
2.
What companies are required to have an audit report on internal control over financial
reporting? (8 points)
Large public companies with at least $100 million in revenue are required to have an
audit report on internal control over financial reporting in addition to a regular audit
report on financial statements.
3.
In an entity, who is responsible for having internal-control system in place, and who is
responsible for overseeing internal control? (8 points)
The entity's management is responsible for having internal-control system in place.
The entity's board-of-director members, who are not part of management, are
responsible for overseeing internal control.
4.
What function does 'internal audit' have in internal control? (8 points)
An entity's internal audit function is a part of monitoring component that assesses
whether the entity's internal-control system works for the purpose it is intended.
5.
What is the documentation requirement of an external auditor on internal control? (8 points)
The documentation requirement of an external auditor on internal control is to
document their understanding of an audit client's internal-control system for both
public and private companies. The auditors are required to document their
understanding of the control environment, risk assessment, control activities,
information and communication, and monitoring.
6.
What are the differences between management letter and (audit) engagement letter? (8
points)
A management letter is a letter prepared by an auditor to discuss non-audit matters,
such as findings and recommendations for improvements in internal control. It is not
