Mich. Admin. Code R. 205.2007 - Understanding audited person, including internal controls, and assessment of risk
Rule 7.
(1) Auditors
must have an understanding of all of the following as it pertains to the
audited person:
(a) Matters relating to the
persons business, including its organization, operating characteristics,
business lines, and capital structure.
(b) Matters affecting the industry in which
the person operates, such as financial reporting practices, economic
conditions, laws and regulations, and technological changes.
(c) Legal or regulatory matters affecting the
person.
(d) Public information
about the person.
(e) The relative
complexity of the person's operations.
(2) Auditors shall obtain an understanding of
the internal controls that are significant within the context of the audit
objective. Both of the following apply:
(a)
The audit objective is not to conduct an audit of internal control over
financial reporting or to express an opinion on the effectiveness of the
person's internal control over financial reporting.
(b) Auditors should have an understanding of
the internal controls in order to plan and perform the audit to obtain
appropriate evidence that is sufficient to obtain reasonable assurance the tax
liability is accurately determined.
(3) Auditors shall assess the risk that
findings, conclusions, and ultimately the tax liability may be improper or
incomplete. The auditor's risk assessment and the determination of the
necessary procedures includes consideration of all of the following:
(a) The complexity of the organization,
business unit, or process.
(b) The
condition of the records.
(c) The
cooperation of the audited person.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.