Page 39 - Internal Auditing Standards

Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts

3. Evaluate the control environment.
Take time to understand the pervasive internal controls that are part of the control environment. Pervasive

controls are quite different from transactional controls; they address such matters such as integrity and
ethics, corporate governance, employee competence, management’s attitudes toward control, fraud
prevention, risk management, and control monitoring. If the “tone at the top” is poor, management
override can easily occur, and even the very best transactional controls over processes such as purchases
and sales could be undermined.

4. Aim for continual improvement.
There is a tendency for some auditors to blindly follow the example of the previous auditor, resulting in a fi le
that mirrors that of the previous year. A much better approach is to continually review/challenge the work
performed in previous years, and identify changes that will make the audit more effi cient and eff ective.

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