Lesson: Internal Controls & Information Technology Controls: Design, Testing, & Deficiencies Objectives

Instructor: Nick Palazzolo

This lesson covers the various aspects of internal controls and information technology controls, providing guidance on how to perform and document procedures to obtain an understanding of the significant components of an entity's control environment. It also delves into the importance of walkthroughs in understanding the flow of transactions relevant to an audit, and how to identify matters related to deficiencies and material weaknesses in internal control that should be communicated to those charged with governance and management. Additionally, the lesson explores the evaluation of significance and limitations of internal control and IT deficiencies on the risk of material misstatements in the financial statements. Dive into this lesson to learn how to effectively assess control risk and consider its various components and factors.

Updated: June 22, 2023 Create an account

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Internal Controls & Information Technology Controls: Design, Testing, & Deficiencies Overview

Internal Controls & Information Technology Controls: Design, Testing, & Deficiencies Objectives

Introduction to Internal Controls and Information Technology Controls

Examples of Internal Controls

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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First off, we're going to want to perform and document the procedures to obtain an understanding of the significant components of an entity's control environment. And remember, the control environment is going to encompass absolutely everything from the code of conduct, the policies and procedures, to physical controls, to logistical controls, administrative controls, HR controls, everything, including entity-level controls through walkthroughs. Now, walkthroughs, let's talk about those. We're going to want to understand how to perform a walkthrough and document the flow of transactions relevant to an audit of the entity's financial statements. These walkthroughs are going to generally be done during the planning stage. However, there's never a reason not to do a walkthrough if you need to do it at a later point. These walkthroughs are going to be us sitting down with management or any relevant personnel, anyone in the internal control department. And these individuals are going to help us understand, OK, person A receives the cash or the check. Then they give it to person B. They deposit it in the bank. Then there's a cash reconciliation who reviews that cash rec. We want to understand how that process works so that when we go in and audit that, we can actually see, is this how it's actually operating? We also want to identify the matters related to deficiencies and material weaknesses in internal control. That should be communicated to those charged with governance and management for an engagement. And how are we going to time these communications? When do they need to be communicated? Lastly, we're going to want to evaluate the significance and limitations of internal control and any IT deficiencies on the risk of material misstatements in the financial statements. These are going to be time really into our control risk, thinking

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Substantive Testing & Internal Controls

Module: 3 Concepts, 45 Lessons

Internal Controls & Information Technology Controls: Design, Testing, & Deficiencies Overview

0:50

Internal Controls & Information Technology Controls: Design, Testing, & Deficiencies Objectives

1:37

Introduction to Internal Controls and Information Technology Controls

1:49

Examples of Internal Controls