28.Understanding and documenting the internal control system
The auditor should understand and document the internal control system.
Relevant documents and records of the entity should be inspected including organization charts, policy manual, charts of accounts, journals and source documents.
To reinforce the understanding of internal control system the auditor should perform walk through tests.
A few transactions within each major class of transactions is traced through the transaction trail and the related control policies and procedures are identified and observed.
Documentation in the working papers may take the form of completed questionnaires, flow charts and narrative memoranda.