Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
3. Evaluate the control environment.
Take time <strong>to</strong> understand the pervasive internal controls that are part of the control environment. Pervasive
controls are quite different from transactional controls; they address such matters such as integrity and
ethics, corporate governance, employee competence, management’s attitudes <strong>to</strong>ward control, fraud
prevention, risk management, and control moni<strong>to</strong>ring. If the “<strong>to</strong>ne at the <strong>to</strong>p” is poor, management
override can easily occur, and even the very best transactional controls over processes such as purchases
and sales could be undermined.
4. Aim for continual improvement.
There is a tendency for some audi<strong>to</strong>rs <strong>to</strong> blindly follow the example of the previous audi<strong>to</strong>r, resulting in a file
that mirrors that of the previous year. A much better approach is <strong>to</strong> continually review/challenge the work
performed in previous years, and identify changes that will make the audit more efficient and effective.