Dhb Industries Inc

Change in net assets for the year. Could include the changes for both the governmental and business type activities.

Having internal controls is one thing, but how the company evaluates that control is a matter all by itself. Being an independent auditor, it is our job to understand an entity and

They changed the way they compute depreciation expense by using the straight-line method, resulting in an increase in net income by $11 million or $.93 per common share.

On the 2009 unaudited statement, there was $59,787,000 and on the audited there was $58,787,000 which accounts for the $1,000,000 difference. Additionally on the Statement of Revenue and Expense for years 2008 and 2009 there was a discrepancy of $1,000,000 in 2009. This discrepancy appeared on the provision for doubtful accounts. The unaudited report showed $13,797,000 and the audited shows $14,797,000 which accounts for the $1,000,000 difference. This makes the “net income” for the year (2009) $627,000 in the unaudited, and 373,000 in the audited statement.

Auditors should always evaluate the design and test the operating effectiveness of a company’s internal control. The key procedures of the evaluation of design are fulfilled by inquires, observations, and inspections. The same procedures can be used to test the operating effectiveness as well.

Internal controls are vital to any company’s business and financial sustainability. Internal controls consist of measures taken by a company safeguarding against fraud, and theft. Internal controls ensure accuracy and reliability in accounting data, and secure policies within the organization. Further, internal controls evaluate all levels of performance. These are addressed with five principles

Performing internal tests of controls is intended to assess the operating effectiveness of those internal controls. Here the staff would select an area of control to test, perhaps inventory management and return policy. They would then look at the procedures that help prevent fraud or error, talk to management, and observe activities. They would notice there is very little control in place for this area. There is no management oversight or dock security measures, no direct recording of sales receipts, shipping labels, or matching to accounts receivable. This would be noted as an area of additional concern. The next stage is to perform substantive testing procedures, where the purpose is to collect audit evidence that the management assertions made in the financial statements are reliable and in accordance with GAAP. Since my staff is good, they would have noticed the company’s sales projections are weak in control and are overstated by around 11%. They would perform a substantive test of detail in this area by selecting a sample of items from the account balances and finding bank statements, invoices, and test of details of balances. They would likely see specifically where the over-projections are being made. Lastly, in finalization, they would compile a report to management detailing any important matters, evaluating the audit evidence, and considering the type of audit opinion that should be reported. Specifically here, they would

The internal controls were correctly monitored within the previous ninety days and have been reported on their findings. We must have a list of all deficiencies in the internal controls and information on any fraud that involves employees who are involved within the internal activities. The report must also include any major noteworthy changes in internal controls that could have a negative impact on the internal controls. (Barth, 2012)

There are requirements placed on management to maintain an accurate accounting of the company. A failure to do so could result in penalties, fines and/or imprisonment. The Sarbanes-Oxley Act (SOX) of 2002 requires that all public companies have internal controls (IC) in place by keeping records and having an outside auditor’s review the records for sound accounting practices.

The term “controls” refers to any aspects of one or more of the components of internal control. (d) Risk assessment procedures – The audit procedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels. IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT ISA 315 274 (e) Significant risk – An identified and assessed risk of material misstatement that, in the auditor’s judgment, requires special audit consideration. Requirements Risk Assessment Procedures and Related Activities 5. The auditor shall perform risk assessment procedures to provide a basis for the identification and assessment of risks of material misstatement at the financial statement and assertion levels.

a. For what purposes should an auditors’ understanding of the internal control components be used in planning an audit?

Internal controls can be taken as any action taken by an organization to help enhance the likelihood that the objectives of the organization will be achieved. Every corporate body has a policy to maintain an effective internal control mechanism relating to its financial statements and financial reporting processes, internal and financial reporting principles, policies and systems, independent auditor qualification and independence, internal audit function and independent auditors ' performance, compliance with legal, regulatory, corporate governance requirements (Kim, 2004). The internal control mechanisms performed under the governance and organizational structure established by the company’s board of directors and senior management and in which all the individual employees of the company must take part in. This assists in ensuring proper, efficient and effective performing of the company’s activities in accordance with the management’s strategy and policies and applicable laws and regulations and to ensure the integrity and the reliability of the accounting and financial system and timeliness and accessibility of information in the data system (Kim and Nofsinger, 2007).

It is not possible to comment on the financial position of the organisation as there is a mismatch of Asset and Liability side (Shown in the Suspense Account). Here at first it is required to find out the reason of such discrepancy. Once it is determined then the financial statement of the organisation need to prepared correctly again and then on the basis of the correct financial statement we can comment on the financial position of the organisation.

Section 404 requires public companies to establish internal controls and report annually on their effectiveness over financial reporting. The CFO and CEO are held personally responsible for the internal controls via the requirement to sign a statement certifying the adequacy of the internal control system (Moffett and Grant, 2011, p. 3). Additionally, the company’s independent auditor must issue an attestation regarding management’s assessment of the internal structure as part of the company’s annual report (Bloch, 2003, p. 68).

Introduction: Internal Audit, as characterized by the Institute of Internal Auditors, is a free, objective assurance and counseling action intended to include esteem and enhance an association 's operations. It helps an association to perform its targets by bringing an orderly, restrained way to deal with assess and enhance the viability of risk management, control, and administration forms. The motivation behind the Office of Internal Audit is to give quality reviewing administrations to guarantee the sufficiency and viability of the retailer of inward controls and the nature of execution by different operations.