What's Internal Control? How its role in auditing process?
March 05, 2017
In this occasion I would like to explain you about internal control and its role in auditing process. As we know or you ever hear that in a company always need internal control, and in our mind arises questions then, such as what's internal control? Why it relates to the auditing process? Right?
First of all, I wanna know you the definition about internal control, from Committee on Auditing Procedures, SAS (Statement on Auditing Standards) No. 1 (par 320-09) 1948-AICPA stated that Internal Control comprises the plan of organization an all of the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies. Based on the definition above, it can be concluded that internal control relates to examination of financial statement and it relates to accountant who inspecting financial statement.
So, what does company's purpose needs internal control? Effectiveness and efficiency of company's operation is one of another purpose of company that internal control should achieve. Another purposes are the reliability of financial information and compliance to the applicable laws and regulation. From these three things that have been mentioned, internal control should be able to provide reasonable assurance for achieving purposes.
After we know about the purposes, we directly think, how the audit process and its relation to internal control? In auditing, we should understand internal control in a company. In company's auditing process, company usually have internal auditor to help management evaluate the control system and show the weakness of internal control, also detect and prevent fraud, so the company can protect it assets that are intangible and tangible. Quoted form AS 2201.05 that The audit of internal control over financial reporting should be integrated with the audit of the financial statements. The objectives of the audits are not identical, however, the auditor must plan and perform the work to achieve the objectives of both audits.
References:
1. Andayani,Wuryan. 2008. Audit Internal. Yogyakarta: BPFE-Yogyakarta
2. https://pcaobus.org/Standards/Auditing/Pages/AS2201.aspx (Access on Sunday, 10.00 a.m)
Auditing II / C1L014007 Laela Fitria Perdana
So, what does company's purpose needs internal control? Effectiveness and efficiency of company's operation is one of another purpose of company that internal control should achieve. Another purposes are the reliability of financial information and compliance to the applicable laws and regulation. From these three things that have been mentioned, internal control should be able to provide reasonable assurance for achieving purposes.
After we know about the purposes, we directly think, how the audit process and its relation to internal control? In auditing, we should understand internal control in a company. In company's auditing process, company usually have internal auditor to help management evaluate the control system and show the weakness of internal control, also detect and prevent fraud, so the company can protect it assets that are intangible and tangible. Quoted form AS 2201.05 that The audit of internal control over financial reporting should be integrated with the audit of the financial statements. The objectives of the audits are not identical, however, the auditor must plan and perform the work to achieve the objectives of both audits.
References:
1. Andayani,Wuryan. 2008. Audit Internal. Yogyakarta: BPFE-Yogyakarta
2. https://pcaobus.org/Standards/Auditing/Pages/AS2201.aspx (Access on Sunday, 10.00 a.m)
Auditing II / C1L014007 Laela Fitria Perdana
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