internal control Qver Financial Reporting
CASES INCLUDED iN THIS SECTiON

1. Simply Steam, Co. 155 Evaluation of Internal Control Environment

2. Easy Clean, Co. 155 Evaluation of Internal Control Environment

3. Red Bluff Inn & Café 165 Establishing Effective Internal Control in a Small Business
4. St. James Clothiers 169 Evaluation of Manual and IT-Based Sales Accounting System Risks
5. Collins Harp Enterprises 177 Recommending IT Systems Development Controls

6. Sarbox Scooter, Inc. 185 Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting
7. Société Générale 195 How a Low-Risk Trading Area Caused a $7.2 Billion Loss case5.!-2 Easy …show more content…

Lack of attention to CE is a potential contributor to several known alleged audit failures. Increased sensitivity to the CE may improve students’ ability to recognize those conditions in which the risks of fraud and material misstatements are high. The EC/SS exercise is intended to demonstrate some of the difficulties that auditors, as well as students, can have in using professional judgment when evaluating the oral assertions of management. The primary function of the exercise is to encourage students to engage in critical thinking about audit judgment and to begin developing a sense of professional skepticism. This case is designed for use in-class. Students should already be familiar with the concepts covered in a textbook chapter covering internal control and/or concepts in AU Section 314, “Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained," and PCAOB Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements." In other words, the case exercise is not intended to introduce students to the control environment. Rather, it is intended to allow them to apply what they have already learned. In the exercise, students are told they will be asked to evaluate aspects of a small service company’s CE, relying primarily on the oral assertions provided by management. The students are then