You are appointed as the auditor of a company manufacturing paints. The company has a robust system of internal control. Most of the controls in the…
CA Intermediate · Auditing and Ethics · PYQS · May 2024
You are appointed as the auditor of a company manufacturing paints. The company has a robust system of internal control. Most of the controls in the company are automated and they are working effectively. However, in certain situations, manual elements in internal controls are more suitable. What are the circumstances where manual elements in internal controls may be more suitable?
Suggested Answer and Working Notes:
Manual elements vs automated elements in entity's internal control: Manual elements in internal control may be more suitable in the following circumstances: Where judgment and discretion are required.Large, unusual or non-recurring transactions.Circumstances where errors are difficult to define, anticipate or predict.In changing circumstances that require a control response outside the scope of an existing automated control.In monitoring the effectiveness of automated controls.
Topics: Risk Assessment and Internal Control
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