Page 140 - Auditing Standards

As of December 15, 2017
Controls over management override;

Note: Controls over management override are important to effective internal control over financial
reporting for all companies, and may be particularly important at smaller companies because of
the increased involvement of senior management in performing controls and in the period-end

financial reporting process. For smaller companies, the controls that address the risk of
management override might be different from those at a larger company. For example, a smaller
company might rely on more detailed oversight by the audit committee that focuses on the risk of

management override.

The company's risk assessment process;

Centralized processing and controls, including shared service environments;

Controls to monitor results of operations;

Controls to monitor other controls, including activities of the internal audit function, the audit

committee, and self-assessment programs;

Controls over the period-end financial reporting process; and

Policies that address significant business control and risk management practices.

.25 Control Environment. Because of its importance to effective internal control over financial reporting,

the auditor must evaluate the control environment at the company. As part of evaluating the control
environment, the auditor should assess -

Whether management's philosophy and operating style promote effective internal control over
financial reporting;

Whether sound integrity and ethical values, particularly of top management, are developed and

understood; and

Whether the Board or audit committee understands and exercises oversight responsibility over
financial reporting and internal control.

.26 Period-end Financial Reporting Process. Because of its importance to financial reporting and to the
auditor's opinions on internal control over financial reporting and the financial statements, the auditor must

evaluate the period-end financial reporting process. The period-end financial reporting process includes the
following -

Procedures used to enter transaction totals into the general ledger;

137