This post addresses audit programs and related audit issues.

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1. Why do auditors have to consider the internal controls of the organization? What are some key elements of internal control? Which are the most important? How will the auditor have to modify the audit program if the internal controls are deemed inadequate to support management assertions?
The internal controls of an organization are the basic foundation for their corporate governance. The auditor is responsible for attesting to the company's internal control structure, and more specifically, to the effectiveness of the internal control procedures in his or her audit report. The auditor must therefore consider internal controls because when there is a poor internal control structure which would be found by the auditor through the appropriate testing, it leaves the company susceptible to fraud and misstatements. The auditor would have to take this into consideration when designing the audit program, because the areas with weak or ineffective internal controls would be at high-risk for fraud and misstatements and would require additional auditor testing. The most important internal controls are typically internal controls over cash and other forms of liquid assets like inventory. Essentially, all areas are important because when internal controls are weak in any area of the company, it can lead to an ineffective control environment. If the internal controls are deemed inadequate to support the assertions, the auditor has to make structure changes in the audit program and also must investigate the effects that the weak internal controls have caused, which starts with identifying the at-risk areas.

2. How are the analytical procedures used in an audit engagement? What premise underlies the use of analytical procedures in auditing? What sources of information can an auditor use to develop expectations? Please provide examples.

When an auditor uses analytical procedures, the auditor is using mainly forms of comparison. For example, the auditor that wants to determine if the accounts receivables ...