Page 80 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
2. Authorization:
Delegation: Management assigns authority levels to individuals.
Scope: Can be general or specific.
Verification: Transactions should match the scope of the authorization.
3. Record Adequacy:
Execution: Ensure transactions match management's authorization.
Recording: Prompt, correct, and relevant recording.
Classification: Ensure transactions are appropriately categorized.
Compliance: Abide by accounting standards and statutory requirements.
Accountability: Facilitate asset accountability through recordings.
Asset Details: Maintain detailed records for periodic physical verification.
Protection: Prevent unauthorized access, use, or disposition of assets and records.
4. Asset Accountability:
Lifecycle: Accountability from asset acquisition to disposal.
Physical Custody: Ensure proper controls over physical access to assets.
Access: Limit access to authorized personnel only.
Physical Verification: Maintain and reconcile records periodically with assets.
Frequent checks: Frequent checks, especially for sensitive assets.
5. Independent Checks:
Review: Periodic assessments by independent individuals.
Purpose: Ascertain the effectiveness of control procedures.
Implementation: Can be carried out by specially assigned staff or external audit.

(CNO-MRI.360) Components of Internal Controls
In general, a system of internal control to be considered adequate should include the following five
components:
(i) Control environment.
(ii) Entity’s Risk assessment Process.
(iii) Control activities.
(iv) Monitoring of Controls
(v) Information system and communication.

(CNO-MRI.380) Control Environment
1. Definition: Attitude, Ability, Awareness, Action of management & TCWG towards internal control system.
Following are elements of control environment.
2. Participation by those charged with governance:
• The control consciousness of an entity is heavily influenced by those charged with governance.
• Their responsibilities are recognized in codes, laws, and guidelines.
• For Example, they oversee whistle blower procedures and review internal control effectiveness.
3. Management’s philosophy and operating style:
• Encompasses management's attitudes towards financial reporting.
• Reflects in choices of accounting principles and the development of estimates.
4. Human resource policies and practices:
• Recruiting standards prioritize qualification, experience, and integrity.
• Training and promotion policies set and reinforce performance and behavior expectations.
• Demonstrates the entity's control consciousness.
4A. Competence
• Pertains to the knowledge and skills required to fulfill job tasks.

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