Miles Cohen
701465100

Chapter 5 Auditing homework

Review Checkpoints (1-17, 19-22, 24-32)
1) The 3 goals of an internal control system according to COSO is (1) Reliability of financial reporting, (2) Effectiveness and efficiency of operations, (3) compliance w/ applicable laws and regulations
2) Human error due to mistakes in judgment, fatigue and carelessness can still occur
3) Reasonable assurance recognizes that the costs of controls should not exceed the benefits that are expected from the controls
4) * Management is responsible for establishing and maintaining adequate internal control over financial reporting, Auditors are responsible for evaluating and finding any risk for the internal control effectiveness
5) Control risk is the probability that an entity’s controls will fail to prevent or detect material misstatement due to error or frauds.
6) To see if the client’s internal control is effective at controlling control risk.
7) Control risk adversely affects all 3 aspects
8) 5 components of management’s internal control (1) control environment, (2) Risk assessment, (3) control activities, (4) Monitoring and (5) information and communication
9) The control environment is the tone set for the organization as the foundation for all other components of internal control
10) Audit committee is a subcommittee of the BOD that is generally composed of 3-6 independt members in the entity’s day-to-day management of the organizations BOD.
11) Risk assessment for an entity is used to find the business risk that a firm faces and how to properly deal with these risks.
12) Control activities are specific actions a client’s management and employees take to help ensure that management’s directives are carried out
13) Preventive controls are procedures that prevent misstatements before they occur while directive controls detect misstatements AFTER