Testing Internal Controls: Exploring Strategies for Verifying Operating Effectiveness

Learning Objectives

• To discuss generally accepted audit requirements related to testing controls for operating effectiveness.
• To explain how to evaluate the results of a control reliance test for operating effectiveness.
• To describe the use of Service Organization Control (SOC1) Reports on a financial statement audit.
• To identify the impact of a control reliance strategy on the detailed audit plan.

Course Description

Internal controls are rules and procedures established by a company to ensure business continuity, prevent fraud, and preserve the integrity and accuracy of financial reporting. Properly designed and effectively operating internal control over financial reporting is critical for preventing, or detecting and correcting, material misstatements.

A test of internal controls is an evaluation of the existing controls, either as part of an official audit or in preparation for an audit, to see if the controls are in place and identify weaknesses. The purpose of internal controls testing is to see if the controls are properly detecting or preventing material errors or purposeful misstatements in financial reports.

This CPE webinar will describe how to satisfy the audit requirements related to taking a control reliance strategy by testing the operating effectiveness of internal controls while promoting an effective and efficient financial statement audit.

Major Topics Covered in this CPE Auditing Webinar:

• Generally accepted audit requirements related to testing controls for operating effectiveness.
• Identifying key controls that may prove effective and efficient to test in a control reliance strategy.
• Responses when deviations are discovered when evaluating the design or operating effectiveness of internal control.
• Leveraging audit evidence available through Service Organization Control (SOC1) Reports.
• General computer control considerations when evaluating the design and operating effectiveness of internal control over financial reporting.

Overview

• Three objectives of internal control

  3 mins
• Reducing control risk

  12 mins
• Timing of control testing

  27 mins
• Nonstatistical sampling in smaller populations

  42 mins
• Deviations: Factors to consider

  63 mins
• Reporting by user auditor

  94 mins