52The auditor shall obtain an understanding of internal control relevant to the audit.

52 The auditor shall obtain an understanding of internal control relevant to the audit.

53 Under paragraph 5 of this Auditing Standard, the auditor needs to use the understanding of internal control to identify types of potential misstatements, consider factors that affect the risks of material misstatement, and design the nature, timing, and extent of further audit procedures. Internal control relevant to the audit is discussed in explanatory paragraphs 59-65 below. In addition, the depth of the understanding is discussed in explanatory paragraphs 66-68 below.

54 Internal control is the process designed and effected by those charged with governance, management, and other personnel to provide reasonable assurance about the achievement of the entity’s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations. It follows that internal control is designed and implemented to address identified business risks that threaten the achievement of any of these objectives.