Page 67 - CA Inter Audit PARAM

CA Ravi Taori
• Control activities that relate to significant risks and those that relate to risks for which
substantive procedures alone do not provide sufficient appropriate audit evidence; or

• Those that are considered to be relevant in the judgment of the auditor;

• As part of the risk assessment, the auditor shall determine whether any of the risks identified
are, in the auditor’s judgment, a significant risk.

QNO— Understanding Control Activity New Course – (SM25)
ICS.06.50 Bhaskar CNO - SA315.P2.140
During the audit of same company, CA Smriti is keen to find out whether there exists a proper system of
segregation of duties in the company. She wants to be sure that a person responsible for recording a
transaction is different from the person authorising it. Discuss what she is trying to do and how its
understanding is significant to her as an auditor.
Answer Meaning of Control Activities
Control Activities are policies & procedures which are written by TCWG & management to ensure that
transaction within the organization are happening as per preference to achieve objectives of the entity to
prevent, detect and correct material misstatement.

Control Relevant to Audit
The auditor shall obtain an understanding of control activities relevant to the audit, which the auditor
considers necessary to assess the risks of material misstatement.

Segregation of duty
Segregation of duty is type of control activity. Segregation of Duties is a type of internal control that is
implemented in a company to prevent two or more conflicting functions from being assigned to or being
carried out by the same person.

Discussion & Conclusion
She is keen to find out whether there exists a proper system of segregation of duties in the company.
She is gaining an understanding of internal control of the company. In particular, she is understanding
“control activities”. When a person recording a transaction is different from one authorizing it, she gains
confidence that there exists a system for preventing misstatements. It helps her in gaining insight into the
internal control system of the company.

Monitoring of Internal Control over Financial Reporting Old Course --
QNO
ICS.07 Bhaskar CNO- SA315-P2.160 (M18E/SM17/N20E/SM20/SM21/N22R)
New Course -- (SM25)
The auditor shall obtain an understanding of the major activities that the entity uses to monitor internal

control over financial reporting Explain
Answer ➢ The auditor shall obtain an understanding of the major activities that the entity uses to monitor
internal control over financial reporting.

Monitoring of controls Defined:
Monitoring of controls is a process to assess the effectiveness of internal control
performance over time.
Helps in assessing the effectiveness of controls on a timely basis:
It involves assessing the effectiveness of controls on a timely basis and taking necessary
remedial actions.
Management accomplishes through ongoing activities, separate evaluations etc.:
Management accomplishes monitoring of controls through ongoing activities, separate
evaluations, or a combination of the two. Ongoing monitoring activities are often built into
the normal recurring activities of an entity and include regular management and supervisory
activities.
Management’s monitoring activities include:
Management’s monitoring activities may include using information from communications
from external parties such as customer complaints and regulator comments that may

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