Question

What are the steps involved in performing an audit of internal controls?

a) plan the engagement
b) identify controls to test
c) test the design and operating effectiveness of selected controls
d) evaluate identified control deficiencies

Answer 1

The audit of internal controls involves planning the engagement, identifying critical controls to test, testing their design and effectiveness, and evaluating any control deficiencies discovered.

Step-by-step explanation:

The steps involved in performing an audit of internal controls include the following:

1. 1. Plan the engagement: This involves setting the objectives, scope, and timing for the audit and determining the resources needed to conduct it effectively.
   2. Identify controls to test: Auditors must identify which controls are critical to the company's financial reporting process and therefore should be tested.
   3. Test the design and operating effectiveness of selected controls: Auditors evaluate whether the controls are properly designed and are operating as intended during the period under review.
   4. Evaluate identified control deficiencies: If any deficiencies in internal controls are found, auditors assess their impact and suggest measures for improvement
2. An audit of internal controls is crucial for providing assurance that a company's financial information is reliable and that the company is in compliance with laws and regulations.