Limitations of internal control 2.3 The auditor can never rely solely on tests of controls because of the inherent limitations in any system of internal control, ie • Poor judgement in decision making • Human error • Processes being deliberately circumvented by employees and others • Management overriding controls, and • The occurrence of unforeseen circumstances. 3 Control activities Overview 3.1 Management design and implement control activities to address risks that threaten the achievement of the entity’s objectives. The auditor needs to obtain an understanding of the control activities relevant to assessing risks of material misstatement at the assertion level. In this section we will look at several of the transaction cycles that are within the scope of the syllabus. Some will be approached from a management perspective, by analysing the relevant cycle and considering how to respond to the main risks. Others will be approached from the audit perspective, considering controls that relate to specific financial statement assertions.
Posted on: Fri, 23 Aug 2013 10:30:34 +0000