Question

Explain the differences between an audit of internal controls as required by PCAOB AS 2201 and the testing of internal controls for the purposes of expressing an opinion on the financial statements as mandated by AU-C 315. Refer to the standards in your answer.

Answer 1

AS 2201 : An Audit of internal control over financial reporting that is integrated with an audit of financial statements

Auditing of internal controls means inspection of internal controls which are reliability of financial reporting, compliance with laws and regulations, effectiveness and efficiancy of oparations, safeguarding of assets etc, to provide reasonable assurance. It includes audit of finacial statements which are profit and loss a/c, balance sheet, cash flow and fund flow statements,etc.

AU-C 315 : Understanding the entity and its invironment and Assessing the risks of material misstatement.

it explains the auditors responsibility while testing the internal controls to analyse the financial statements and to identify the material misstatements in the financial statements for proper opinion by understanding the entity and and its environment.