Changes in recent years to the CPA exam have resulted in CPA preparation courses containing an increasing amount of information about internal control. This is a reflection of demands on CPAs in the workplace to perform assessments of internal control procedures.
Not only is evaluation of internal control a step performed by external auditors, but companies are also demanding that corporate staff CPAs include analysis of internal control with their risk assessment duties. CPAs are at the forefront of internal control initiatives because the effectiveness of this area is vital to efficiency of company management.
According to a report by the International Federation of Accountants, internal control has become part of overall risk management rather than a fringe element of business. This explains the elevated position of internal control within CPA review material. The subject is part of the expansive volume of accountant education as well as an integral component of CPA work for an organization.
The IFAC report determined that integration of internal control into the general risk assessment process is resulting in new demands on CPAs. Just as study for CPA exam success requires a holistic approach to how various concepts are connected, accountants are expected to complete a comprehensive view of a commercial entity’s operations. This must include some evaluation of uncertainty embodied in an organization’s internal control risks.
Accountants are making inquiries during risk assessments that consider the same details as CPA exam questions covering internal control matters. The IFAC suggests that CPAs first identify the various responsibilities within different departments. This is followed by asking about a coordination of these controls at a senior level. Organizations should understand the impact of overlapping risks attributable to common causes and have a strategy for mitigating consequences to a risk level identified by company policy.
An important role for internal auditors has always entailed process monitoring and determination of procedure effectiveness. Now, the role of CPAs within corporate enterprises is increasingly directed at facilitating prudent business decisions with risk assessments that include internal control factors.
Effective internal control systems are a superior defense against failure for any business endeavor. Accountants are the key ingredient in creating, evaluating, preserving, and reporting on internal control mechanisms that sustain a company’s operations. As a result, a foundation of internal control knowledge has become a crucial piece of CPA exam prep.
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