Accounting

Internal controls that are effective, on financial reporting offers assurance that is reasonable, in regard to the dependability of the financial statements preparation and reporting, of an entitys financial statements especially for external use. Since an auditor owes duty of care to the external users as well as all the stakeholders who will make their decisions based on the audit report, it is very important for an auditor to gain reasonable understanding about the internal controls of the entity whose financial statements are being audited. If there are material weaknesses in the internal controls of the entity, then there are high chances of the financial reporting made by the entity being ineffective (Moeller, 2005).

The objectives of an auditor when auditing the internal controls of an entity, is to express an objective opinion regarding the effectiveness of the entitys internal controls. If the internal controls of an entity cannot be said to be effective for one reason or the other, then the auditor cannot use them as a basis of forming and expressing his opinion. Therefore, the auditor must perform and plan the audit in order to get evidence that is competent and adequate so as to obtain assurances that are reasonable on whether the material weaknesses were present on the date that is specified by the assessment of the management. It is important to note that it is possible for material weaknesses to exist in the internal controls even in circumstances when there are no material misstatements in the financial statements (Vasarhelyi  Kogan, 1998).

The auditor has the responsibility of detecting any weaknesses in the internal controls of the entity. Once such weaknesses are detected, they should be reported to the management in order to ensure that the entity does not suffer in future due to such weaknesses. The auditors should perform and plan their audits in a similar manner whether they are auditing private or public entities. However, there is a general tendency by most auditors to assume that the internal controls of a private company are much stronger than those of public companies and hence rely on them more heavily in expressing an opinion. This should not be the case as it is also possible to have weaknesses in the internal controls of a private entity. The responsibility of an auditor does not differ whether the audit is being conducted on a private company or a public one (Moeller, 2005). 

The internal control responsibilities for an auditor do not differ when auditing either a private or a public limited company. In both cases, the auditor has the responsibility of assessing the internal controls to enable him or her to express an opinion in regards to it. In either a public or a private company, if the internal controls are strong according to the auditor, then the auditor can rely on them in expressing his or her opinion (Vasarhelyi  Kogan, 1998).