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Internal Control and Audit Sampling

You have discussed with the president of Vista Corporation several material weaknesses in internal control that have come to your attention during your audit. At the conclusion of this discussion, the president states that he will personally take steps to remedy these problems and that there is no reason for you to bring these matters to the attention of the board of directors. He explains that he believes the board should deal with major policy decisions and not be burdened with day-to-day management problems. How would you respond to this suggestion?

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The president's opinion doesn't really matter in this case with this particular topic. Current auditing standards and the AICPA require that auditors inform the board of directors of material weaknesses in internal control. One of the main problems is that oftentimes, the president and other executives are aware of the material weaknesses before the auditor discovers the weaknesses, and if there is a misstatement, the president or other executives ...

Solution Summary

This solution discusses the situation at Vista Corporation. A detailed suggestion regarding the major policy decisions is presented.