Auditors verify the effectiveness of internal controls

How do internal auditors measure effectiveness & efficiency?

This Practice Guide helps internal auditors measure their effectiveness and efficiency by providing guidance on establishing a performance measurement process, identifying key performance measures, and monitoring and reporting on the level of customer service provided to internal audit stakeholders

Should internal control over financial reporting be integrated with financial statements?

The audit of internal control over financial reporting should be integrated with the audit of the financial statements

The objectives of the audits are not identical, however, and the auditor must plan and perform the work to achieve the objectives of both audits

What are some internal controls relevant to an audit?

Some internal controls relevant to an audit include bank reconciliations, password control systems for accounting software, and inventory observations

The objective of the auditor is to identify and assess the risk of material misstatement, whether due to fraud or error, at the financial statement and assertion levels

×Auditors verify the effectiveness of internal controls through a variety of methods. These methods include:

Inquiry: asking staff to describe verbally how a control activity is performed
Observation: observing a control procedure as it is physically performed
Inspection: inspecting source documents
Re-performing client procedures
Evaluating the effectiveness of an organization's system of internal controls
Assessing whether the control has been properly designed to prevent or detect a material misstatement in the financial statements
Assessing the operational effectiveness of the control, which determines whether the control is applied consistently through the period and by whom is it applied

Business guideline committee

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is an organization that develops guidelines for businesses to evaluate internal controls, risk management, and fraud deterrence.
In 1992, COSO published the Internal Control – Integrated Framework, commonly used by businesses in the United States to design, implement, and conduct systems of internal control over financial reporting and assessing their effectiveness.

Business guideline committee