Page 86 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
• Job Rotation in Sensitive Areas
o Extended periods of performing the same job by an individual can result in complacency and
increase the risk of misuse, particularly in sensitive areas.
o Therefore, it is crucial to regularly implement job rotation in key commercial functions to prevent
the erosion of controls.
• Standard Operating Procedures (SOPs)
Well-defined Standard Operating Procedures (SOPs) play a crucial role
o in defining roles, responsibilities,
o processes, and controls within an organization.
o They effectively communicate operating controls to all individuals involved in a process.
o This ensures that controls are clearly understood and consistently applied, even in situations of
employee turnover.
• Segregation of Job Responsibilities
o A vital aspect of control is to avoid concentration of multiple activities in a single individual for a
transaction or decision.
o Segregation of duties is an essential control element that ensures different commercial activities
are not carried out by the same person.

(CNO-MRI.540) Techniques of evaluation of Internal control
The following are the techniques of evaluation of internal control:
Questionnaire (Shortcut: ISP Questions Purpose & then Concludes)
1. Introduction
Standardization: Auditing firms create standardized internal control questionnaires.
Objective: Capture all general situations, though not all may apply to every case.
2. Structure
Sections: Questionnaire includes separate sections (e.g., purchases, sales, receivables, payables).
Audience: Intended for company executives responsible for the areas.
3. Practical Concerns
Time-consuming: Time-consuming for busy executives to fill out.
Lack of Clarity: Questions might be unclear to some executives.
Misplacement: Possibility of losing the questionnaire in transition.
Solution: Auditors often meet with executives to fill the form or fill it themselves, ensuring executives'
agreement.
4. Question Design
Simplicity: Questions usually seek 'Yes', 'No', or 'Not applicable' answers.
Weakness Identification: A "No" answer often indicates a control weakness.
Consistency: Questions should be consistent, sequential, logical, and corroborative.
Detailing: Some questions may require detailed answers for clarity.
5. Purpose & Frequency
Record Keeping: Questionnaire acts as a record for the auditor regarding internal control status.
First-year Engagement: Issuance is mandatory.
Subsequent Years: Auditor asks if business or control changes occurred instead of issuing a new questionnaire.
Third Year: Good practice to issue every third year, regardless of changes, to keep client control conscious.
6. Conclusion
Versatility: Questionnaires can be tailored for different aspects of the internal control system.

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