CIS

• Auditing is the systematic process of objectively obtaining and evaluating evidence regarding assertions about economic action and events to ascertain the degree of correspondence between those assertions and established criteria, and communicating the results to interest users
• Corporate fraud includes:

  lack of independence, inactive, total absence, lack of experience members
• Give the 3-audit opinion formulation process.

  Risk assessment, risk response and reporting
• Assess, develop and identify the risk of material misstatement including response.

  Risk assessment
• Give the components of audit risk:

  Inherent risks, control risks and detection risks
• are auditing techniques used for reducing audit risk to an acceptable level.

  Test of controls and substantive tests
• Risk assessment procedures are used in audits to obtain an understanding of the entity and its environment, including its internal control.
• • The stronger the internal control structure, as determined through tests of controls, the lower the control risk and the less substantive testing the auditor must do. 
• The objective of the tests of controls phase is to determine whether adequate internal controls are in place and functioning properly.

  Test of controls
• Internal control system four broad objectives:

  safeguard assets, ensure the accuracy n' reliability, promote efficiency
• Four modifying principles of internal control systems:

  Management responsibility, methods of data processing, limitations, reasonable assurance
• establishment and maintenance of a system of internal control is management responsibility

  Management responsibility
• Internal control system limitations includes:

  possibility of error, circumvention, management override and changing conditions
• PDC model consist of 3 level of control:

  Preventive controls, detective controls and corrective controls
• Important elements of the control environment:


  Integrity, structure, participation, management philosophy, procedure, management method and external influence
• The accounting information system consists of the records and methods used to initiate, identify, analyze, classify, and record the organization’s transactions and to account for the related assets and liabilities.
•  

  Six Categories of Physical Controls

  1. Transaction authorization 
  2. Segregation of duties 
  3. Supervision 
  4. Accounting records 
  5. Access controls 
  6. Independent verification
• 
  

  Two Categories of IT Controls

  1. Application controls
  2. General controls
• balancing routine that verifies that the total payments to vendors reconciles with the total postings to the accounts payable subsidiary ledger.


  Cash disbursements batch
• identifies and flags employee time card records with reported hours worked in excess of the predetermined normal limit.

  Payroll system limit check