Page 81 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
4B. Assignment of authority and responsibility
• Policies ensure appropriate business practices, expertise of key staff, and provision of necessary resources.
• Communication ensures staff understands the entity’s objectives and their role in achieving them.
4C. Organisational Structure
• Important for establishing clear authority, responsibility, and reporting lines.
• Depends on the entity's size and nature of operations.
5. Communication and enforcement of integrity and ethical values
• Control effectiveness relies on the integrity and ethical behaviour of individuals in charge.
• The values are based on entity’s standards, their communication, and enforcement in practice.
• Ethical policies and codes of conduct are communicated to staff.
• Management actions help mitigate unethical temptations.

(CNO-MRI.400) Entity’s Risk Assessment Process
Identifying Business Risk: Management identifies business risks relevant to the preparation of financial
statements following the entity's financial reporting framework.
Significance of Risk: The significance of these identified risks is assessed by the management.
Likelihood of Risk: The likelihood of these risks occurring is evaluated by the management.
Management Response to Risk: Management may implement plans to address specific risks or choose to accept
a risk due to cost or other considerations. This includes risks from external and internal events that may affect
the entity's ability to report financial data.
Circumstances leading to risks:
Shortcut “PFA- TRAGIC” risk assessment
• New Personnel: may have a different focus on or understanding of internal control.
• Expanded Foreign operations: carries new and often unique risks that may affect internal control such
as risks from foreign currency transactions.
• New Accounting pronouncements: Adoption of new or changing existing accounting principles may
affect risks in preparing financial statements.
• New Technologies into production processes or information systems may change the risk associated with
internal control.
• Changes in the Regulatory or operating environment can result in changes in competitive pressures and
significantly different risks.
• New business models, products, or Activities: Entering business areas or transactions with which an
entity has little experience may introduce new risks associated with internal control.
• Rapid Growth Significant and rapid expansion (Growth) of operations can strain controls and increase the
risk of a breakdown in controls.
• New or revamped Information systems: Significant and rapid changes in information systems can
change the risk relating to internal control.
• Corporate restructurings: Restructurings may be accompanied by staff reductions and changes in
supervision and segregation of duties.

(CNO-MRI.420) Control Activities
(Shortcut: Prof SPI)
Control Activities Relevant to Audit can be categorised as:
• Physical Controls: Controls that encompass:
o The physical security of assets and records.
o The authorisation for access to computer programs and data files.
o The periodic counting and comparison with control records
• Segregation of Duties: Assigning different people

www.auditguru.in 4.10