Committee of Sponsoring Organizations Internal Control Framework

Auditing discussion questions
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Describe the three broad objectives management has when designing effective internal controls. Which of the three categories of broad objectives for internal controls are considered by the auditor in an audit of both the financial statements and the internal control over financial reporting? Which of these controls do you see in your organization?
Reporting objectives - it is the responsibility of the management to prepare financial statements for users who rely on presented information (Stamler et al., 2013). The financial statements should be fairly presented and in accordance with GAAP. This responsibility ensures that the management maintains proper internal control over financial reporting.
Operating objectives- the controls in place encourage efficient and effective use of resources. Hence, there should be financial as well as non financial information on the entity to facilitate decision making (Stamler et al., 2013).
Compliance objectives- since the adoption of the Sarbanes-Oxley Act, public companies are required to give a report on whether the internal controls are effective for financial reporting (Stamler et al., 2013). Similarly, not for profit organizations and non public entities are obliged to adhere to laws and regulations (Stamler et al., 2013).
You have identified a suspected fraud involving the company's controller. Whatmust your do in response to this discovery? How might this discovery affect your report on internal control when auditing a public company?
It is important to look for sufficient evidence to ascertain that there was risk of material misstatements associated with the fraud. Furthermore, this would prompt me to look into the impact of the fraud on the audit process. The next course of action is to discuss with the management, audit committee and senior committee. In public companies, perpetuation of fraud raises question on the effectiveness of internal controls in place (Singleton & Singleton, 2010). Even immaterial misstatements that are discovered show that the internal control system is weak. Auditors of public companies should give an adverse opinion in the audit report if it is discovered that fraud is because material weaknesses exist. The auditor should obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. The understanding must be good enough to adequately plan the audit in terms of what specific planning matter? Why are these matters important?
According to Public Company Accounting Oversight Board (2013), the planning matters important to audit planning include:
Information about the internal control over financial reporting from previous engagements
Recent changes in the organization, internal controls and its operation
Control deficiencies that have previously been identified
Auditor’s judgement on material weaknesses, materiality and risk before conducting the audit
Evidence on the effectiveness of internal controls in place
Complexity on the entity’s operations.
The aforementioned matters are important in audit planning, as the auditor gets to understand how they ...