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(iii) Control Activities

(iv) Information and Communication

(v) Monitoring

The COSO Framework is designed to be used by organizations to assess the effectiveness of the system
of internal control to achieve objectives as determined by management. The Framework lists three
categories of objectives as below:

1 Operations Objectives – related to the effectiveness and efficiency of the entity’s operations,
including operational and financial performance goals, and safeguarding assets against loss.

2 Reporting Objectives – related to internal and external financial and non-financial reporting to
stakeholders, which would encompass reliability, timeliness, transparency, or other terms as
established by regulators, standard setters, or the entity’s policies.

3 Compliance objectives – In the Framework, the compliance objective was described as “relating to
the entity’s compliance with applicable laws and regulations.” The Framework considers the increased
demands and complexities in laws, regulations, and accounting standards.

QNO Checklist for IFCR Over C&B Old Course – (M22E)
175.600 TITANIUM CNO—MRI.560
Mr. K has been appointed as statutory auditor of SK Limited for issuing an audit opinion on financial
statements and internal controls over financial reporting (ICFR) for the year ended March 31, 2022 under
the Companies Act, 2013. Guide Mr. K to prepare a checklist in the form of questions for testing internal
control over cash and bank balances. When forming an opinion on ICFR is it necessary for Mr. K to test the
transactions only at the balance sheet date?
Answer In the given case of SK Limited, the appointed auditor Mr. K would prepare checklist for testing internal
control over cash and bank balances. An illustrative set of questions to be answered by the audit staff
is as follows:
Have you checked that the cashier –

(i) is not responsible for opening the incoming mails;
(ii) does not authorise any of the ledgers;
(iii) does not authorise any expenditure or receipt;
(iv) does not sign cheques;
(v) takes his annual leave regularly;
(vi) inks and balances the cash book every day;
(vii) verifies physical cash balance with the book figure daily at the end of the day;
(viii) prepares monthly bank reconciliation statement;
(ix) holds no other funds or investment;
(x) holds no unnecessary balance in hand;
(xi) does not pay money without looking into compliance with proper procedure and due
authorisation; and
(xii) has tendered proper security or has executed a fidelity bond?

In the given situation, Mr. K is Statutory Auditor of SK Limited for issuing opinion on financial
statements and internal control over financial reporting. He should surely test transactions during the
financial year and not just as at the balance sheet date, though the extent of testing at or near the
balance sheet date may be higher. From the discussion given above, it can be concluded that it would
not be necessary for Mr. K to test the transactions only at the balance sheet date.

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