Accounting All-in-One For Dummies, with Online Practice, 2nd Edition

Chapter 5

Auditing a Client’s Internal Controls

IN THIS CHAPTER

Understanding the nature and components of internal controls

Deciding whether to audit internal controls

Figuring out whether controls are strong or weak

Designing audits around strong or weak controls

Timing internal control procedures

Your client’s management is responsible for making sure checks and balances are in place to safeguard all its assets — both cash and noncash — and to avoid material (significant) misstatements of its financial information. In the accounting world, these checks and balances are called internal controls.

Think of the internal controls you use in your everyday life: Before you go to bed at night, do you check all the doors and windows to make sure they’re locked? That’s an internal control procedure that helps you ensure safety and protect your assets. Do you go around the house turning off lights and checking that your children are in bed? More internal controls (to help you conserve energy ...