Evaluation of Internal Control Environment for Easy Clean, Co.

Subject: Evaluation of Internal Control Environment for Easy Clean, Co.

Purpose:

As auditors for our new client, Easy Clean, Co. (who has previously never been audited), we must identify the strength of their internal control environment to insure that it supports the following: the effectiveness of their operations, reliability of financial reporting, and compliance with the law. The purpose of our evaluation is to determine the preliminary control risk of our control environment in order to check whether it is working to support the company’s objectives or whether there is a risk or material misstatement because of poor implementation of controls.

Mode of Procedure:

In order to gain the greatest insight into our clients control environment we have conducted thorough interviews and reviewed interview responses to identify the effective reality of how well the controls actually work. These interviews were conducted with both management and staff in order to gain a better understanding of how and why the control environment is set up the way it is. All questions were geared towards gaining the most information about whether or not the intended control is functioning the way it should and whether there are areas where internal controls are lacking.

Outside of interviews we physically observed our client’s physical location in order to witness the effectiveness of internal controls; these observations specifically helped us to assess physical safeguards of assets, control over assets, segregation of duties, dual custody, and internal controls related to documents and record keeping. These observations gave us even more insight into where controls are effective and where they can be improved.

We looked specifically at different aspects of our client’s control environment; these seven different aspects include: Integrity and ethical values, Commitment to competence, Board of directors or audit committee participation, Management’s philosophy and operating style, Organizational structure, Assignment of authority and responsibility, andHuman resource policies and practices. Specifically we have evaluated each of these seven components and rated their effectiveness; we placed an emphasis on controls relating to accounting procedures, transaction recording, and control over assets. Additionally, our evaluation over the various components of the control environment also provided greater detail about all areas of risk including both internal and external while giving us great insight into our preliminary control risk.

* Each individual component of the control environment will be rated based on a scale from 1-7. 1 will demonstrate a severely limited and ineffective internal control while 7 will represent an effective and strong internal