As a supplement of my previous post (auditing standard for reporting entity internal control), through this post provides a set of report examples released by auditor who engage in examining effectiveness of entity’s internal control.

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There are not less than 11 examples adapted from the Statement on Standards for Attestation Engagements (SSAE) 10, “Attestation Standards: Revision and Recodification” issued by the Auditing Standard Board.

Having the examples, you can see how they’re look alike in the real implementation. You can even use it for real examination of entity’s internal control, if you want. What you need to do is just append any text with this mark “[…]”.

 

Example-1. Auditor Opinion Directly On The Effectiveness Of An Entity’s Internal Control

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ABC Company maintained in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-2. Auditor’s Opinion On Management’s Assertion


To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined management’s assertion, included in the accompanying [title of management report], that ABC Company maintained effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on management’s assertion based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assertion that ABC Company maintained effective internal control over financial reporting as of December 31, 2011, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Important Note: The practitioner should identify the responsible party’s report examined by referring to the title used by the responsible party in its report. Further, he or she should use the same description of the entity’s internal control as the responsible party uses in its report, including the types of controls (that is, controls over the preparation of annual financial statements, interim financial statements, or both) on which the responsible party is reporting. If the presentation of the assertion does not accompany the practitioner’s report, the phrase “included in the accompanying [title of the responsible party’s report]” would be omitted.

 

Example-3. Material Weakness In Internal Control Qualified Opinion

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA
Independent Accountant’s Report

We have examined the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

[Include sentence(s) describing the material weakness and its effect on the achievement of the objectives of the control criteria.] We believe such condition represents a material weakness. A material weakness is a condition that precludes the entity’s internal control from providing reasonable assurance that material misstatements in the financial statements will be prevented or detected on a timely basis.

In our opinion, except for the effect of the material weakness described in the preceding paragraph on the achievement of the objectives of the control criteria, ABC Company has maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-4. Material Weakness In Internal Control—Adverse Opinion

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

[Include sentence(s) describing the material weakness and its effect on the achievement of the objectives of the control criteria.] We believe such condition represents a material weakness. A material weakness is a condition that precludes the entity’s internal control from providing reasonable assurance that material misstatements in the financial statements will be prevented or detected on a timely basis.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, ABC Company has not maintained effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-5. Scope Limitation—Qualified Opinion

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination.

Except as described below, our examination was conducted in accordance with attestationstandards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Prior to December 20, 2011, ABC Company had an inadequate system for recording cash receipts, which could have prevented the Company from recording cash receipts on accounts receivable completely and properly. Therefore, cash received could have been diverted for unauthorized use, lost, or otherwise not properly recorded to accounts receivable. We believe this condition was a material weakness in the design or operation of the internal control of ABC Company in effect at [date]. A material weakness is a condition that precludes the entity’s internal control from providing reasonable assurance that material misstatements in the financial statements will be prevented or detected on a timely basis. Although the Company implemented a new cash receipts system on December 20, 2011, the system has not been in operation for a sufficient period of time to enable us to obtain sufficient evidence about its operating effectiveness.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to the risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, except for the effect of matters we may have discovered had we been able to examine evidence about the effectiveness of the new cash receipts system, ABC Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-6. Scope Limitation—Disclaimer Of Opinion


To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We were engaged to examine the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting.

[Scope paragraph should be omitted]
[Explanatory paragraph to describe scope restrictions]

Since management [describe scope restrictions] and we were unable to apply other procedures to satisfy ourselves as to the entity’s internal control over financial reporting, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the effectiveness of the entity’s internal control over financial reporting.

Henry and Ohara

February 15, 2012

 

Example-7. Opinion Based In Part On The Report Of Another Auditor

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination.

We did not examine the effectiveness of internal control over financial reporting of Basic Company, a wholly owned subsidiary, whose financial statements reflect total assets and revenues constituting 20% and 30%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2011. The effectiveness of Basic Company’s internal control over financial reporting was examined by other accountants whose report has been furnished to us, and our opinion, insofar as it relates to the effectiveness of Basic Company’s internal control over financial reporting, is based solely on the report of the other accountants.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination and the report of the other accountants provide a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to the risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our examination and the report of the other accountants, ABC Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-8. Reporting On A Segment Of The Entity’s Internal Control

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the effectiveness of ABC Company’s internal control over financial reporting for its retail division as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ABC Company’s retail division maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-9. Reporting On The Suitability Of Design

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the suitability of ABC Company’s design of internal control over financial reporting to prevent or detect material misstatements in the financial statements on a timely basis as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ABC Company’s management is responsible for the suitable design of internal control over financial reporting. Our responsibility is to express an opinion on the design of internal control based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, evaluating the design of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to the risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ABC Company’s internal control over financial reporting is suitably designed, in all material respects, to prevent or detect material misstatements in the financial statements on a timely basis as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Lie Dharma Putra and Partners

February 15, 2012

 

Example-10. Criteria Specified By A Regulatory Agency

 

To the Board of Directors

ABC Company

Costa Mesa, CA, USA

Independent Accountant’s Report

We have examined the adequacy of ABC Company’s internal control over financial reporting as of December 31, 2011, based on [identify criteria, e.g., the criteria established by[__________ Agency, as set forth in its audit guide dated __________]. ABC Company’s management is responsible for maintaining adequate internal control over financial reporting. Our responsibility is to express an opinion on whether the internal control is adequate to meet such criteria based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control over financial reporting, testing, evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We understand that the agency considers the controls over financial reporting that meet the criteria referred to in the first paragraph of this report adequate for its purpose. In our opinion, based on this understanding and on our examination, ABC Company’s internal control over financial reporting is adequate, in all material respects, based on the criteria established by [__________Agency].

This report is solely intended for the information and use of the board of directors and management of ABC Company and [__________ Agency] and is not intended to be and should not be used by anyone other than these specified parties.

Lie Dharma Putra and Partners

February 15, 2012

 

Example-11. Management Representations

 

[Client letterhead]
[Date of Auditor’s report]

[Auditor’s name][Address][City, State]

Dear___________:

In connection with your examination of the effectiveness of ABC Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of December 31, 2011, we confirm, to the best of our knowledge and belief, the following representations made to you during your examination.

1. We are responsible for establishing and maintaining internal control over financial reporting.

2. We have performed an evaluation of the effectiveness of ABC Company’s internal control over financial reporting using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

3. Based on our evaluation, we assert that ABC Company maintained effective internal control over financial reporting as of December 31, 2011, based on the above specified control criteria.

4. We have disclosed to you all significant deficiencies in the design or operation of internal control that could adversely affect ABC Company’s ability to record, process, summarize, and report financial data consistent with our assertions in the financial statements.

5. There are no material weaknesses in internal control. [We have identified all deficiencies in internal control we believe to be material weaknesses.]

6. There has been no [We have disclosed to you all]:
a. Fraud involving management or employees who have significant roles in internal control.
b. Fraud involving other employees that could have a material effect on the financialstatements.

7. Subsequent to the date being reported on, there have been no [we have disclosed to you all] significant changes to internal control and no other factors have arisen that might significantly affect internal control. [We have disclosed to you the corrective actions taken by us with regard to significant deficiencies and material weaknesses.]

Very truly yours,

______________________

Chief Executive Officer

 

______________________

Chief Financial Officer