3.Document control 1.pdf

Obtaining an understanding of the entity’s internal controls Obtaining an understanding of the entity’s internal controls ? Narrative notes ? Flow charts ? Internal control questionnaires (ICQs) ? Internal control evaluation questionnaires (ICEQs) Documenting system - Narrative notes Definition Advantage Disadvantage Narrative notes consist of a written description of the system; they would detail what occurs in the system at each stage They are simple to record; after discussion with staff these discussions are easily written up as notes. Narrative notes may prove to be too cumbersome, especially if XX system is complex. An alternative to this is to use a flow chart to show each stage of the process Documenting system - Flowcharts Definition Advantage Disadvantage Flowcharts are a graphic illustration of the internal control system. It is easy to view the XX system in its entirety as it is all presented together in one diagram. There is still the need for narrative notes to accompany the flowchart and hence it can be a time consuming method. Documenting system - Questionnaires Definition Advantage Disadvantage Internal control questionnaires (ICQ) or internal control evaluation questionnaires (ICEQ) contain a list of questions; ICQs are used to assess whether controls exist whereas ICEQs test the effectiveness of the controls. Questionnaires are quick to prepare, which means they are a timely method for recording the system. It can be easy for the staff members of client to overstate the level of the controls present as they are asked a series of questions relating to potential controls.