The auditor of a public company in the retailing industry is planning an integrated audit. The company has approximately 260 retail stores, primarily in the southeastern United States.
a. Explain why an analysis of the company's control environment is important to planning the integrated audit.
b. The company claims that it has a strong control environment, including a culture of high integrity and ethics (COSO Principle 1), a commitment to financial reporting competencies (COSO Principle 4), and an independent, active, and knowledgeable board of directors (COSO Principle 2). For each of these princi- ples, develop an audit program to gather evidence that these principles are operating effectively. In developing your answer, be sure to indicate the type of audit procedures to use.