Audit & controls — Excel guide
Controls and audits exist so numbers can be trusted: prevent errors and fraud inside, verify statements outside.
Internal controls
Segregation of duties (the person recording cash doesn't handle it), authorization limits, reconciliations, and physical safeguards. Bank reconciliations catch both errors and mischief — which is why they're done by someone who can't post entries.
Internal vs external auditors
Internal auditors are employees improving operations and controls; external auditors are INDEPENDENT and opine on the statements for outside users. Independence is the whole product.
Audit opinions
What the report can say, best to worst.
| Opinion | Meaning |
|---|---|
| Unqualified (clean) | Statements fairly presented |
| Qualified | Fair EXCEPT for a described matter |
| Adverse | Statements are materially misstated |
| Disclaimer | Couldn't get enough evidence to opine |
SOX and materiality
Sarbanes-Oxley 404 makes management (and the auditor, for large filers) attest to internal control effectiveness. Materiality is the threshold below which misstatements don't matter to a reasonable user — it scales with the company.