QUESTIONS :
1. What is internal control ?
2. Why in auditing we have to
understand and examine the internal control of the entity ?
ANSWER
1. Internal control is a control
process in an entitiy that do using all the resources to help manager or
internal parties on improving, directing and monitoring all activities in the
entity in purpose to provide reasonable assurance regarding to the objectives
of the entity.
There are 3 (three) purposes
of entity based on COSO (Committee of Sponsoring
Organizations of the Treadway Commission)
1.
Effectivity and efficieny on
operational
2.
Reliability of financal report
3.
Compliance to the applicable laws
Based on COSO there are 5 (five)
components in internal control :
1. Control environment
- atmosphere in the entitiy is made
relevant to behavior standard in that entity
2. Risk Assesment
- identify the risk during process
to achieve entity's goals
3. Control activities
- set the procedures to reduce the
risk
4. Information and communication
- provide relevant and accurate
information
5. Monitoring
- do an evaluation to make sure that
every components in the entitiy are relevant to the objectives
2. In auditing we have to understand
and examine internal control in the entity because the purpose of auditing is
to find the failure of a financial report that not relevant to the standard and
also to detect is there any fraud or not. Internal control help the auditor to
detect and prevent fraud, so the entity can protect it assets that are tangible
( cash, fixed asset, inventory) and intangible (reputation, trademark). In
Indonesia there is government regulation (Peraturan Bapepam-LK
No.IX.I.7, Lampiran Keputusan Ketua Bapepam-LK No.Kep-496/BL/2008) that stated all auditors have to understand and implement
internal control that applied by the entity where the auditor work for. I think
that it will make auditor easy to do their job, with know how internal control
system in that entity, the auditor will know the strengths and weakness of the
system, know the condition of the entity, know what’s the problem and the
auditor can know in what activity or in what kind of assets that has high risk (many
possibilities to do fraud).
LARASATI NANDA RAHMALIA
C1L014021
references :
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