An internal control questionnaire is a key tool used by internal auditors to assess risks that could prevent an audited area from achieving its objectives. Learn about the purpose and importance of internal control questionnaires in the internal audit process.
Table of Contents
Question
What is the purpose of an internal control questionnaire?
A. To gather information from a sample of people who are geographically dispersed.
B. To assess risks that could prevent an audited area from achieving its objectives.
C. To evaluate the level of compliance of remote offices with centrally designed procedures.
D. To perform testing of controls more frequently.
Answer
The correct answer is: B. To assess risks that could prevent an audited area from achieving its objectives.
Explanation
An internal control questionnaire (ICQ) is a document used by internal auditors to evaluate the adequacy and effectiveness of an organization’s internal controls. Its primary purpose is to identify potential risks and weaknesses in the internal control environment that could hinder an audited area from meeting its goals and objectives.
Key points about the purpose of an internal control questionnaire:
- Risk assessment: The ICQ helps auditors systematically assess risks associated with the audited area’s activities, processes, and controls. By identifying risks, auditors can prioritize audit focus areas and develop appropriate audit procedures.
- Control evaluation: The questionnaire serves as a checklist to evaluate the design and operating effectiveness of internal controls. It helps determine whether controls are adequate to mitigate identified risks and ensure the reliability of financial reporting, compliance with laws and regulations, and efficient operations.
- Information gathering: While an ICQ can be used to gather information from geographically dispersed individuals (option A), this is not its primary purpose. The questionnaire is typically completed by the audited area’s management or key personnel who have a thorough understanding of the processes and controls in place.
- Audit planning: The results of the ICQ aid in the development of the audit plan by identifying areas that require further investigation or testing. However, the questionnaire itself is not used to perform testing of controls more frequently (option D).
- Centralized compliance: Although an ICQ may indirectly help evaluate compliance with centrally designed procedures (option C), this is not its main objective. The primary focus is on assessing risks and control effectiveness within the specific audited area.
In summary, an internal control questionnaire is an essential tool used by internal auditors to assess risks, evaluate control effectiveness, and gather information to plan and conduct an audit engagement. Its primary purpose is to identify potential threats to an audited area’s ability to achieve its objectives, enabling auditors to provide valuable insights and recommendations for improvement.
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