Page 260 - F1 - AB Integrated Workbook STUDENT 2018-19

Chapter 16

Internal control and audit

7.1 Why internal control interests the external auditor

Auditors need to gain an understanding of the systems and controls.

This enables the auditor to:

 Assess the level of control risk

 Determine the audit approach to take

Reliance on internal controls will reduce the amount of substantive testing of
transactions and resultant balances in the ledger accounts required.

Substantive tests are tests of accuracy and they are used to establish
facts.

At an early stage in their work the auditors will have to decide the
extent to which they believe they can place reliance on the internal
controls of the enterprise.

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