Question

Please describe each of the three broad objectives management typically has for internal control. With which of these objectives is the auditor primarily concerned?

Answer 1

The three broad objectives which the management typically has for internal control are mentioned below:

Reliability of financial reporting:

It is the managements' responsibility to ensure that true and fair information is presented in accordance with GAAP and IFRS.

Efficiency and effectiveness of operations:

Controls ensure that the productivity and quality of a company's operations keep improving continuously.

Compliance with laws and regualtions:

Internal controls are designed to ascertain that all necessary laws and regulations are complied with. All forms of organizations follow many laws and regulations. Some of these are related to accounting while some are not.

For an auditor, the objective of reliability in financial reporting and the compliance with laws and regulations as these purposes are common to an audit of controls and financial statements as well.