Question 1
Two key concepts that underlie management's design and implementation of internal control are
◦ costs and materiality.
◦ absolute assurance and costs.
◦ inherent limitations and reasonable assurance.
◦ collusion and materiality.
Question 2
When considering internal controls,
◦ auditors can ignore controls affecting internal management information.
◦ auditors are concerned with the client's internal controls over the safeguarding of assets if they affect the financial statements.
◦ management is responsible for understanding and testing internal control over financial reporting.
◦ companies must use the COSO framework to establish internal controls.