Name: Võ Nguyễn Phương Uyên Class: Auditing_S219DH42ISB-2

ID: 31161024233

HOMEWORK CHAP 6

6-1 What are management’s incentives for establishing and maintaining strong internal controls?
What are the auditor’s main concerns with internal controls?
Incentives:
 help auditor identify key controls
 recognize the types of potential misstatements that are relatively likely to arise
 design tests of controls and substantive procedures.
Concerns: management may be unable to make informed decisions about issues such as product
pricing, cost of production, and profit information, and external reports may not be useful to
investors and other stakeholders.

6-2 What are the potential benefits and risks to an entity's internal control from information
technology?
Benefits
 Consistent application of predefined business rules and performance of complex calculations
in processing large volumes of transactions or data
 Enhancement of the timeliness, availability, and accuracy of information
 Facilitation of additional analysis of information
 Enhancement of the ability to monitor the performance of the entity activities and its policies
and procedures
 Reduction in the risk that controls will be circumvented
 Enhancement of the ability to achieve effective segregation of duties by implementing
security controls in applications, databases, and operating systems

Risks
 Reliance on systems or programs that inaccurately process data, process inaccurate data, or
both
 Unauthorized access to data that may result in destruction of data or improper changes to
data, including the recording of unauthorized or nonexistent transactions or inaccurate
recording of transactions
 Unauthorized changes to data in master files
 Unauthorized changes to systems or programs
 Failure to make necessary changes to systems or programs
 Inappropriate manual intervention
 Potential loss of data