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What are the factors influencing the control of audit environment?

      

What are the factors influencing the control of audit environment?

  

Answers


Wilfred
•• The function of the board of directors or the audit committee. The control environment is significantly influenced by the effectiveness of the board of directors or the audit committee. This effectiveness is determined by the extent of its independence from management, experience and status of members and the extent to which it raises and pursues difficult matters with management and also its relationship with internal and external auditors.
•• Management philosophy, style and ease with which managers could override controls. Management philosophy refers to whether the management likes taking risk in business or has a conservative approach. This has an impact on the overall reliability of financial statements. If they are risk takers, losses are likely and may want to hide them. If they are conservative to risk, there may be no business hence low profits and this may lead to falsification of financial statements.
•• The implementation of organizational structure and methods of assigning authority and responsibility. This determines how well employees understand the limits placed upon their powers and responsibilities. The objective is to separate responsibility for authorizing a transaction, keeping records for the transaction and custody of assets acquired from the transaction.
•• Personnel policies and procedures. Employees should be recruited on basis of skills and knowledge essential for the performance of their jobs and if necessary, be trained
Wilfykil answered the question on April 11, 2019 at 11:52


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