Documentations of Internal Control
Internal control is an efficient system of control is established by the management in the conduct of mousiness including internal cheek, internal audit, and other forms of control.
Documenting the understanding of the internal control structure components is required in all audits. Documentations in the working papers may take the form of completed questionnaires, flowcharts, decision tables, and narrative memoranda.
(a) Questionnaires: A questionnaire consists of a series of questions about ICS policies and procedures that the auditor considers necessary to prevent material misstatements in the financial statements. The questions are usually phrased so that either a Yes or No.
(b) Flowcharts: Flowcharts describe the flow of activity through a process, as well as the relevant documentation. The main output is a process map – a graphical representation of events performed by a group of people. Process maps can help auditors better understand business processes; save time on communicating and confirming business processes with management; identify risks, controls, deficiencies, and inefficiencies, and develop recommendations for improvements.
(c) Narrative Memoranda: Narrative memoranda provide a useful supplement to flowcharting documentation by debiting existing practices and thereby minimizing potential misunderstandings. Independently, however, narrative descriptions do not serve as an effective tool for process description – they can be lengthy and difficult to review, and typically are not coasted user-friendly.