An understanding of internal control assists the auditor in identifying potential misstatements and factors that affect the risks of material misstatement, and in designing the nature, timing and extent of further audit procedures.

Required:

Explain the limitations of internal control systems. One method of recording an audit client's accounting and internal control system is using narrative notes.

Describe two advantages and two disadvantages of using narrative notes to document accounting and control systems.

Briefly describe two alternative methods of documenting accounting and control systems.