The company has a responsibility to establish and implement internal and external controls for proper accounting reporting. Target Corporation has done a good job of developing these controls and thus the accounting has been reliable and accurate. To assist in a audit of the company, it must establish substantive procedures that can follow up on the EPS accounting policy. A testing to confirm events and their occurrence would be helpful to ensure that the events and transactions have actually occurred and are recorded in the financial statements accordingly.
The objective of this internal control over financial reporting audit is to evaluate Wells Fargo Corporation’s controls over the fair value reporting process. The internal control audit is subject to Auditing Standard No. 5 which covers “An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements”. The audit plan scope will review points such as the valuation of assets, liabilities, the use of external pricing services and internal model valuations.
In order to utilize these procedures the audit must cross-reference the accounting system within each service industry by evaluating the data and how does it entered. By completing the basic audit of the financial statements it is possible to see if the account balances are correctly recorded. In this case the audit must review completeness, presentation and disclosure, existence or occurrence, valuations or allocation, right and obligations.
According to PCAOB Auditing Standard 5 paragraph 2, “effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. If one or more material weaknesses exist, the company 's internal control over financial reporting cannot be considered
During my industrial training at Aljafree & Co, there are several significant problems that might be occur during the gathering information of audit evidence and the problems that incurred can cause the auditing works cannot to proceed very well. The problems that have to consider are:-
Auditing has become quite a challenge in recent years due to all the fraud scandals that has been going on. Such is the case that government was required to intervene and created the Sarbanes-Oxley Act; one of most significant reforms related to public companies since 1934. Modern corporations aren’t ran by their sole proprietors anymore but by managers whose job is to protect their interest. Particularly this is one of the reasons why the demand of auditing arose due to the natural conflict of interest between the owner and the manager. Both of these individuals will naturally look out for their best interest and will forget about the other. The owner wishes to see his company grow while the manager wishes to grow his pockets; their interests
The report on internal controls, according to ExxonMobil’s CEO, Treasurer and Controller, states they are solely “responsible for establishing and maintaining adequate internal control over (ExxonMobil’s) financial reporting.” They evaluated the effectiveness of internal controls over financial reporting based on COSO’s framework and concluded that controls were effective (MD&A, F-22). The report in internal controls acknowledged us—ExxonMobil’s independent public accounting firm PricewaterhouseCoopers LLP (PwC)—stating that the Corporation maintained effective internal control over financial reporting for 2009 and 2010 as it is the responsibility of management to maintain and assess its effectiveness. We, PwC, are responsible only to express an opinion on internal controls, which we opined in 2009 as unqualified (MD&A, F-22).
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
“A strong internal control system which includes an independent and efficient internal audit function contributes to an efficient and reliable governance”. (Andrei, 2015). Corporate governance is defined as “the ways in which suppliers of finance to corporations assure themselves of getting a return on investment. (Hamza, T., & Mselmi, N.,2017) In an effort to accomplish a stronger system, the Institute of Internal Auditors created a new concept called the “three lines defense model.” (Andrei, 2015) With this model, the first line of defense consists of the management and support functions. The second line of defense is the control function. Finally, the third line of defense is the internal audit function, which “verifies all the other control functions and to give assurance over the internal control system in place.” (Andrei, 2015) The Institute of Internal Auditors or IIA regulate internal auditors with a set of standards called the International Standards for the Professional Practice of Internal Auditing. The IIA does not discriminate against companies who want to utilize outside sources to perform internal audits if it is done efficiently. “The IIA’s Code of Ethics requires internal auditors to evaluate information objectively, while not being unduly influenced by their own interests.” (Stefanick, Houston and Cornell, 2012) On the other hand, “the IIA believes that oversight and responsibility for the
As technology expands and the global business community grows closer, demands are placed on the internal auditor for greater visibility into internal controls. This will enable the auditor to expand audit coverage in order to identify and mitigate risk, whilst keeping within the confines of limited resources (ACL Executive Brief 2006:1).
Ashbaugh-Skaife et al (2007), clearly understood reporting mechanisms exist to alert senior management to new and changing risks regarding financial statements, reliable controls are embedded in day-to-day operations to manage risks and to enable compliance with relevant legislative financial management requirements , ineffective or unnecessary controls are identified and replaced/corrected to reduce costs and/or reallocate resources and adequate monitoring of internal controls is in place to ensure that they are applied effectively and appropriate action is taken when control breakdowns are
The creation of a team to perform the effective auditing of an Information Technology (IT) organization is a daunting task. Some of the key elements that should be considered while creating an IT audit team are highlighted in this critical thinking report, such as what should be the primary focus of the team, what are the key positions, the skill-sets needed for each member of the team, outside assistance or co-sourcing should be considered or not, and determining the value of the audit pertaining to the entire organization. Moreover, the expected outcome of this report is to provide all crucial aspects of successfully creating an IT audit team, so that the team is fully efficient to figure out each and every pros and cons of the internal controls of an IT department.
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.