figure 7.1

7.4 Figure 7.1 showed that there are two broad levels of regulation and control relating to the external and internal environment. Assume that you are the auditor of an entity providing advice to clients on financial matters. You are aware that there have been serious reductions in the value of shares quoted on stock exchanges throughout the world and that this will have a negative impact on pensions in the future. Explain how management of the entity should react to this external factor. Consider the control environment of the entity and auditors' interest. + L inh - FIGURE 7.1 Layers of TEYTT colare pen External environment Expectations of corporate governance importance to economy in general role of commercial enterprises in economy greste tratarency and the public interest Regulatory response government regulation-national European and regulation other than by government stock exchanges Commercial pressures can detected by the database Catan the entity to entity staff However, no 10 what is mee decision makin will be accept retuire its trad 7 Internal environment Dion of aroun and medium We have in Control environment and related components Management phaosophy operating style: Integrity ethical values and competence Company organizational structure Establishing objectives Corporate governance chal find that These quality and also to in Control procedures Monitoring and corrective action Information systerns Communication Managing change Internal con Internal contr Accounting, quality assurance/control systems The process ance, mana achievemen in effective and regulati component General controls Atels development bhaintenance contra Organizational controls Security of data and hawar Quality assurance controls You can se Teliability of regulations. tiveness and an important View of what Staan us wat are rele Application controls Data capture/input controls Data processing controls Controls over output - Controls over assets and liabilities Limitations Betere we being 7.4 Figure 7.1 showed that there are two broad levels of regulation and control relating to the external and internal environment. Assume that you are the auditor of an entity providing advice to clients on financial matters. You are aware that there have been serious reductions in the value of shares quoted on stock exchanges throughout the world and that this will have a negative impact on pensions in the future. Explain how management of the entity should react to this external factor. Consider the control environment of the entity and auditors' interest. + L inh - FIGURE 7.1 Layers of TEYTT colare pen External environment Expectations of corporate governance importance to economy in general role of commercial enterprises in economy greste tratarency and the public interest Regulatory response government regulation-national European and regulation other than by government stock exchanges Commercial pressures can detected by the database Catan the entity to entity staff However, no 10 what is mee decision makin will be accept retuire its trad 7 Internal environment Dion of aroun and medium We have in Control environment and related components Management phaosophy operating style: Integrity ethical values and competence Company organizational structure Establishing objectives Corporate governance chal find that These quality and also to in Control procedures Monitoring and corrective action Information systerns Communication Managing change Internal con Internal contr Accounting, quality assurance/control systems The process ance, mana achievemen in effective and regulati component General controls Atels development bhaintenance contra Organizational controls Security of data and hawar Quality assurance controls You can se Teliability of regulations. tiveness and an important View of what Staan us wat are rele Application controls Data capture/input controls Data processing controls Controls over output - Controls over assets and liabilities Limitations Betere we being