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 southeast part of the United States.

Required

a. Explain why an analysis of the company's control environment is important to the planning of the integrated audit.

b. The company claims that it has a strong control environment including a culture of high integrity and ethics, a commitment to financial reporting competencies, and an independent, active, and knowledgeable audit committee. For each of these items, develop an audit program to gather evidence that these elements are effective.

Organize your answer around each of these three elements:

• Integrity and ethical climate

• Financial reporting competencies

• Effective audit committee in developing your answer identifies the following two components:

• Evidence that would convince the auditor that the component of the control environment was effective

• Procedures the auditor would use to gather the evidence