Question 1 (32 marks) In terms of ISA 315 (Revised) Identifying and assessing the risks of material misstatement through understanding the entity and its environment, internal control has five components, one of which is the entity's risk assessment process. The suggestion here is that to adequately control the business, the directors (management) should assess the risks which the business faces, from minor risks to major risks and respond to the risks by putting internal control procedures/mechanisms/activities in place. In this manner the entire internal control system will be developed. YOU ARE REQUIRED TO: a) define business risk. (2) b) list the other four components of internal control (other than the entity's risk assessment process). c) briefly explain the term control environment. (2) (3) d) discuss whether the external auditor is directly interested in all the business risks which are identified by the company's risk process. (3) e) describe briefly the elements which make up that part of a company's information system which is relevant to a company's financial reporting system. (6) f) state, using four key words in your answer, the objective which management aims to achieve in an accounting (financial reporting) system by implementing application control procedures. (2) g) discuss each of the following in relation to internal control: (1) strong control environment (2) sound personnel practices (3) appropriate and comprehensive segregation of duties (4) isolation of responsibilities (5) comprehensive access control (6) good document design (7) regular and frequent comparison and reconciliation. (14)