An Audit of Internal Control Over Financial Reporting

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An Audit of Internal Control Over Financial Reporting

While the audit of internal control over financial reporting (ICFR) and the audit of financial statements have different objectives, the auditor must plan and perform the audit work to achieve the objectives of both audits as an integrated audit. Using a top-down, risk-based approach, the auditor should design tests of controls to accomplish the objectives of both audits simultaneously.

The auditors objective in an ICFR audit is to express an opinion on the companys internal control over its financial reporting. To meet this objective, an auditor must plan and perform the audit and obtain reasonable assurance. As a sequential process, an audit of internal control over financial reporting includes the following five steps (see Figure 7-2): (1) Plan the Audit of ICFR (Plan); (2) Identify controls to test (Identify); (3) Evaluate the design and test the operating effectiveness of selected controls (Scope); (4) Evaluate identified control deficiencies (Evaluate); and (5) Form an opinion on the effectiveness of the ICFR (Report).

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