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How is an auditor’s work affected by a company’s internal controls?

How is an auditor’s work affected by a company’s internal controls?

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Answer #1

Auditor has to make sure that financial statements provide a true and fair view. Internal controls are the cornerstone on which accuracy in the financial statements is based. Initially auditor test the effectiveness of internal control with respect to preventing, detecting and correcting the material misstatements.

If the auditor deduces that internal controls are effective then he had to do less amount of work and can bear with high detection risk. If he thinks that controls are not effective, then he has to perform additional procedures which also lead to higher audit fees.

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