Evaluation of Internal Control from a Control Objective Narrative

Abstract

Many accounting firms have changed the way their auditors evaluate internal control. Instead of preparing flowcharts documenting transaction flows, they only document the controls that have a bearing on specific financial statement assertions. This shift in documentation marks a change in the structure of the internal control evaluation task from transaction flow to control objective. This case presents documentation organized by control objective for internal control of a company's purchasing cycle. The case includes discussion and objective format questions and is relatively short, which means it can be used as an in-class or out-of-class exercise or an in-class testing or assessment device on internal control evaluation.