Page 74 - CA Inter Audit PARAM

CA Ravi Taori

QNO Benefits of Evaluation of Internal Controls Old Course – (M19E/M19R/N22R)
ICS.31 Bhaskar CNO- SA315-P2.200
So far as the auditor is concerned, the examination and evaluation of the internal control system is an
indispensable part of the overall audit programme. The auditor needs reasonable assurance that the
accounting system is adequate and that all the accounting information which should be recorded has in fact
been recorded. Internal control normally contributes to such assurance. Explain stating clearly the benefits

of evaluation of internal control to the auditor.
OR
The examination and evaluation of internal control system is an indispensable part of the overall audit
programme. State the areas which the 'Review of Internal controls' will enable the auditor to know.
Answer ➢ Benefits of Evaluation of Internal Control to the Auditor: The review of internal controls will
enable the auditor to know:
2 2
4 2
Remember Shortcut:-A R IS E for benefits
A- whether an adequate internal control system is in use and operating as planned by the
management;
A- whether any administrative control has a bearing on his work (for example, if the control
over worker recruitment and enrolment is weak, there is a likelihood of dummy names being
included in the wages sheet and this is relevant for the auditor);
A- what would be appropriate audit technique and the audit procedure in the given
circumstances;
A- what are the areas where control is weak and where it is excessive; and

R- how far and how adequately the management is discharging its function in so far as correct
recording of transactions is concerned;
R- how reliable the reports, records and the certificates to the management can be;

I- whether an effective internal auditing department is operating;

S- whether the controls adequately safeguard the assets;
S- whether some worthwhile suggestions can be given to improve the control system

E-whether errors and frauds are likely to be located in the ordinary course of operations of
the business;
E- the extent and the depth of the examination that he needs to carry out in the different
areas of accounting;

QNO Benefits of IT Controls Old Course -- (M19R/ M22R)
ICS.33 Bhaskar CNO- SA315-P2.335
Explain how does IT benefits an entity’s internal control.
2
Answer -C AATS is good IT system for companies
Generally, IT benefits an entity’s internal control by enabling an entity to:

Reduce the risk that Controls will be circumvented; (frauds may not be aware about hidden
systems , so that they cannot circumvent them)
Consistently apply predefined business rules and (E.g. Bonus calculation of 10,000 employees)
perform complex calculations in processing large
volumes of transactions or data;
Facilitate the Additional analysis of information; (average leaves and overtime analysis)
Enhance the Ability to monitor the performance of the (Anytime, anywhere access to server)
entity’s activities and its policies and procedures;
Enhance the Timeliness, availability, and accuracy of (Every day at 12pm automatic backup)
information
Enhance the ability to achieve effective Segregation of (Id based data and programme access)
duties by implementing security controls in
applications, databases, and operating systems.

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