Surgent's Surging Auditors: Internal Out of Control

Overview

In this hands-on game, participants are helping to prepare an internal control testing plan for Home Décor & More (HDM). They must assess controls related to HDM’s inventory cycle to determine which financial statement assertions each control satisfies, the quality of the control’s design, and whether there is adequate segregation of duties. Then, they will complete the HDM control testing plan, including the level of reliance to place on each control and the test of control methods. Each participant wants to be spot-on with the evaluation before submitting the information to a manager for feedback.

Prerequisites

None

Objectives

• Explain the professional standards related to and rationale for understanding and testing internal controls
• Discuss the professional standards related to testing controls for operating effectiveness
• Illustrate the appropriate level of linkage between the work performed in testing internal controls, control reliance and reporting on internal controls
• Identify impact of a control reliance strategy on the detailed audit plan

Highlights

• Refresher on understanding internal controls
• When testing internal controls is required
• When testing of internal controls is an effective strategy to reduce substantive testing
• Designing tests of controls
• Responses when deviations are discovered in the design or operating effectiveness of internal control