18. Explain how an IT environment affects independent verification. Independent Verification. Verification procedures are independent checks of the accounting system to identify errors and misrepresentations. Information technology drives the financial reporting processes of modern organizations. Automated systems initiate, authorize, record, and report the effects of financial transactions. The completed and stable IT environment can affects independent verification more effective. 20. Discuss the key features of Section 302 of SOX.
Section 302 requires that corporate management (including the CEO) certify their organization’s internal controls on a quarterly and annual basis. Section 302 also carries significant auditor implications. Specifically, external auditors must perform the following procedures quarterly to identify any material modifications in controls that may impact financial reporting 22. Section 404 requires management to make a statement identifying the control framework used to conduct its assessment of internal controls. Discuss the options in selecting a control framework. Regarding the control framework, the SEC has made specific reference to COSO as a recommended model. Furthermore, the PCAOB Auditing Standard No. 5 endorses the use of COSO as the framework for control assessment. Although other suitable frameworks have been published, any framework used should encompass all of COSO’s general themes
24. Prior to SOX, external auditors were required to be familiar with the client organization’s internal controls, but not test them. Explain.
Prior to the passage of SOX, external auditors were not required to test internal controls as part of their attest function. They were required to be familiar with the client organization’s internal controls, but had the option of not relying on them and thus not per- forming tests of controls. Therefore the audit could, and often did, consist primarily of substantive tests.
26. The PCAOB...
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