Question

Which of the following is not an element of management's assessment process for the effectiveness of internal control?

1) Identifying financial reporting risks and related controls.
2) Determining the locations and business units to include in the evaluation.
3) Evaluating evidence about the operating effectiveness of ICFR.
4) Obtaining the auditor's assessment of the internal control effectiveness.

Answer 1

Management's assessment process for ICFR effectiveness includes identifying risks and controls, selecting locations, and evaluating operational effectiveness, but not obtaining the auditor's assessment, which is a subsequent independent process.

Step-by-step explanation:

The process of management's assessment of the effectiveness of internal control over financial reporting (ICFR) does not inherently include obtaining the auditor's assessment of the internal control effectiveness. Management's responsibility is to evaluate and assert the effectiveness of ICFR before an external auditor assesses it. The auditor's role is to independently evaluate management's assertions and provide an opinion. Therefore, the option that states 'Obtaining the auditor's assessment of the internal control effectiveness' is not an element of management's assessment process but is a subsequent activity performed by the auditor.

1. Identifying financial reporting risks and related controls.
2. Determining the locations and business units to include in the evaluation.
3. Evaluating evidence about the operating effectiveness of ICFR.