1. Henry Bailey, CPA, is planning the audit of The Neighborhood Store, a local grocery cooperative. Because The Neighborhood Store is a small business operated entirely by part-time volunteer personnel, internal control is weak. Bailey has decided that he will assess control risk at the highest level for all assertions and not restrict audit procedures in any area. Under these circumstances, may Bailey omit the consideration of internal control in this engagement? Explain.

2. How does separation of the record-keeping function from custody of assets contribute to internal control?

3. What consideration, if any, may external auditors give to the work of a clients internal audit staff?

4. Describe the relationship between corporate governance and internal control.