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Essay Available:
Pages:
4 pages/β‰ˆ1100 words
Sources:
3 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Term Paper
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 25.27
Topic:

Communication: Gaps in Internal Control

Term Paper Instructions:

For the final project, you will assume the role of lead auditor at an external auditing firm, Willis & Adams. The firm is reevaluating its client list and audit procedures. You will be responsible for supporting the continued engagement of a current client, EarthWear Clothiers, and planning the audit of this organization’s financial statements. You will evaluate and recommend improvements to internal controls, and communicate the audit opinions to the senior management of the organization. Specifically, the following critical elements must be addressed: I. Client Engagement: The external auditing team has been approached by a client to do their yearly audit. You are responsible for evaluating the factors associated with the organization and the external auditing team to determine why it would be appropriate to move forward with the client request.

A. Evaluate the corporate structure and annual report of the organization, and summarize your findings.

B. Evaluate the following information related to the external auditing firm, and summarize your findings:

1. Independence

2. Knowledge of client industry

3. Staffing capabilities

C. Assume your firm has decided to move forward. Referring to your evaluation of internal and external factors, explain why it would be appropriate for the external auditing team to accept the client audit request, using examples to support your response.

II. Planning the Audit: Select one of the organization’s business objectives and create an audit plan of the organization’s financial statements. Use the information from your preliminary review and auditing standards to support your plan. A. Using your selected business objective, create an audit plan of the organization’s financial statements that addresses the following, and support each with the appropriate auditing standards:

1. Business risks

2. Management assertions

3. Audit risk

4. Internal controls

5. Effect on audit procedures

B. Determine materiality by conducting a preliminary risk assessment, and explain which factors were used in making this determination.

III. Internal Control: Evaluate the following components within an organization for gaps in internal controls, and explain how each can be improved:

A. Control environment

B. Risk assessment

C. Information system

D. Control activities

E. Monitoring activities

IV. Communication: Create a letter to management that identifies any gaps in internal control and provides resolution. In addition, in a separate section of your submission, include audit opinions of both the internal controls and the financial statements of the organization.

A. Prepare a letter to management that clearly communicates internal control deficiencies or material weaknesses, and provide recommendations to remediate concerns.

B. Prepare an audit opinion of internal controls, and explain the impact it has on the audit of financial statements.

C. Prepare an audit opinion of financial statements, and explain why the opinion is appropriate based on findings in the audit.

Term Paper Sample Content Preview:


Communication: Gaps in Internal Control
Student Name
Institution
Course Name
Instructor
Date
Communication: Gaps in Internal Control
To: Earth Wear Clothiers, Board of Directors
From: [Lead Auditor Name]
Date: November 10, 2023
Re: Identified Gaps in Internal Control
Our firm organized and carried out an audit of the accounting records of EarthWear Clothiers for the year that ended in December 2016. The audit report was prepared in compliance with widely accepted accounting standards and auditing practices in the U.S. The fiscal year-end audit was conducted with consideration for and integration with the audit of the internal control system for accounting records. The available data sufficiently support the opinion on internal controls held by Willis & Adams. On the other hand, Willis & Adams' control risk evaluations for the financial statement audit have been sufficiently validated.
It is important to note that the following are the descriptions of a shortcoming and a material weakness as per the 2019 PCAOB Auditing Standard: When a control's layout or method of operation prevents management or staff from carrying out their assigned duties to stop or quickly identify fraudulent information, that constitutes a defect in internal control over accounting records. A flaw or set of defects constitutes a substantial shortcoming in internal control over financial reports. A serious risk exists that significant errors in the firm's annual or quarterly financial reports may not be found or fixed.
I want to draw your attention to the deficiencies Willis & Adams discovered following our comprehensive audit of the accounting records regarding the EarthWear Company's internal controls over accounting records: EarthWear lacks a succession strategy in the event of an unforeseen event. Senior executives and important staff members must succeed since they are aware of and accountable for supervising internal control and financial reporting (PCAOB, 2019). There is an operational shortcoming in the absence of a formal succession plan. A new controller was not 

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