Homework Sourse1 What is the connection between communication and internal
Solution
As per the final two components of COSO - Information and Communication AND Monitoring Activities, there exist a indespinsible relation between internal control and communication. Internal Controls refer way organisation would be managed by the management, it represents the control put over the activities of the organisation and are required to be honored by all the stakeholders. For which, it is also required that internal controls are communicated to the stakeholders effectively. If they are not communicated than it is possible that they are not been followed as required.
Further, as much as the internal control is duty of top management, it is also expected of the employees to identify right and wrong and thus mechanism should be in place to hold meetings where in middle and lower level management can communicate with top management to inform or complain about the possible wrong doings occuring in the company. If there would exist no such arrangement, internal controls would just be on papers.
Thus, it is required to have proper channel of communication for effective internal controls
Answer 2
Auditor can follow various approaches to tackle the problem based upon the situation. However, to start with they should first get to understand the the nature of the act, the circumstances in which it occurred, and sufficient other information to evaluate the effect on the financial statements.
They should also enquire management about their involvement and if the answer is unsatisfactory then they should seek legal advice on the matters and follow up on additional audit procedures like checking supporting documents, get third party confirmations, set accountability etc.
