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Understanding Key Audit Controls and Risks

The document describes the key controls for the audit. It mentions that a key control must allow the system to provide accounting information and/or help prevent errors, and must provide relevant evidence for the audit objectives. It also explains that identifying systems, controls, and risks helps the auditor understand information flows, establish risk areas, and issue recommendations for the entity. Finally, it summarizes the types of audit risks such as detection risk,

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8 views8 pages

Understanding Key Audit Controls and Risks

The document describes the key controls for the audit. It mentions that a key control must allow the system to provide accounting information and/or help prevent errors, and must provide relevant evidence for the audit objectives. It also explains that identifying systems, controls, and risks helps the auditor understand information flows, establish risk areas, and issue recommendations for the entity. Finally, it summarizes the types of audit risks such as detection risk,

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© All Rights Reserved
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KEY CONTROLS

To refer to a key control, it must meet two


conditions:
1.- If it works well, it will allow the system to provide
accounting information and/or help to avoid or detect
timely errors or significant irregularities.
2.- Provide the auditor with an audit satisfaction
relevant, in relation to the objectives of the audit
against the controls or procedures that the
entity.
Regarding the key controls, it is important to mention that the re-
system and information collection and verification of the
internal course helps us to:
• Obtain a general understanding of systems
accounting administrators, in order to understand how the flow
information through them.
• Establish the risk areas, which will require special
attention to defining audit procedures.
• Issue a letter of recommendations for the purpose of
to assist the entity in achieving efficiently and effectively its
objectives.
• Identify those controls that will directly influence through
of the trust granted by the auditor on approaches to
audit to be used.
The identification process can be summarized as follows
scheme:
AUDIT RISK
Definition
It is the risk of issuing a report that does not
corresponds with the reality of the States
accounting (an erroneous balance is issued).
The risk of issuing an erroneous report, due to
example: submit a 'clean' report (without
reservations), limitations or submission to facts
futures.
RISK OF DETECTION:
It is the risk attributable to the figure of the Auditor, the risk
that arises when carrying out your work.

Inadequate determination of...


• Nature What procedures?
• Scope How many receipts am I going to
control? How many clients am I going to survey?
• Opportunity When am I going to apply the
procedures?
2. Control
They are endogenous risks due to possible failures in the
internal controls, in the information systems, in
the procedures, in the existing structure, in the
levels of authorization, etc.)
They are controllable risks by the company, not by him.
auditor.
Example: Not conducting bank reconciliations properly.
monthly due to the lack of necessary resources
3. Inherent Risk
They are risks of the context, specific to each industry or
company.
They are not manageable by the management.
Example: Risk of uncollectibility due to recession
economic, due to the characteristics of the products with
very rapid technological advancement.

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