The assessment of the soundness of internal controls occurs during the fieldwork stage of the audit process. This phase involves a thorough examination of the organization's operational systems and processes. Auditors actively gather evidence about internal controls, which includes testing various controls to determine their effectiveness and efficiency. This helps identify any weaknesses or deficiencies within the internal control structure, which is essential for providing assurance that financial statements are free from material misstatement.
In contrast, the planning stage focuses on establishing the scope and objectives of the audit, determining resource allocation, and designing the audit approach based on the preliminary assessment of risk. The reporting stage is where auditors communicate their findings, conclusions, and recommendations based on the evidence collected. Lastly, the follow-up stage addresses whether the organization has implemented the recommendations made in the audit report and whether the internal controls have improved since the audit was conducted. The fieldwork stage is thus uniquely centered around direct engagement with and assessment of internal controls.