Show
Recommended textbook solutions Intermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions Financial Accounting4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas 1,097 solutions Essentials of Investments9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie 689 solutions Century 21 Accounting: General Journal11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman 1,009 solutions Upgrade to remove ads Only ₩37,125/year
Terms in this set (56)Internal Control a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following three categories: Reliability of financial reporting. reasons internal controls can fail Human error due to mistakes in judgment, fatigue, and carelessness can still occur. Reasonable Assurance The concept that recognizes that the costs of control activities should not exceed the benefits that are expected from the control activities Management is responsible for establishing a control environment; assessing the risks it wishes to control; specifying information and communication channels and content (including the accounting system and its reports); designing and implementing appropriate control activities; and monitoring, supervising, and maintaining the control activities. also in a position to estimate the benefits to be derived from specific controls and then weigh them against the costs. They are expected to make their own judgments about the necessity of specific controls. In addition to certifying the entity's financial statements and disclosures under Section 302, Sarbanes-Oxley requires management to assess and report on the entity's internal control over financial reporting in Section 404. Report on Internal Control over Financial Reporting A statement that management is responsible
for establishing and maintaining adequate internal control over financial reporting. Under Section 302, management must also disclose any material weaknesses in internal control. If any material weaknesses exist, management may not be able to conclude that the entity's internal control over financial reporting is effective. Integrated Audit Process The term used to describe an audit process that is designed to provide an opinion on both the financial statements and internal control system of an entity, for each fraud risk identified during the planning stage , the audit team should evaluate whether the client has implemented control activities that are specifically designed to address the risk of fraud that has been identified. final reason for evaluating an entity's internal control is to assess the risk of material misstatement (RMM) for each relevent assertion The assessment of RMM at the assertion level is completed for all financial statement audits in order to give the audit team a basis for planning the audit and determining the nature, timing, and extent of further audit procedures to be conducted for the financial statement audit Control Risk The likelihood that the client's internal control policies and procedures fail to prevent or detect a material misstatement According to Coso you want an internal control system that has 3 things First, the system will allow for effective and efficient operations. Second, it will allow for reliable financial reporting. And, third, the system will allow the organization to comply with its laws and regulations. the COSO report defines five basic components of a properly designed internal control system (1) control environment, (2) risk assessment, (3) control activities, (4) monitoring, and (5) information and communication. Important to note that should be considered as working in an interrelated manner to support the internal control system's overall effectiveness Control Environment Sets the tone of the organization. It is the foundation for all other components of internal control. integrity, ethical values, and competence of the entity's people The following are general principles of an effective internal control environment: Integrity and ethical values. Sound integrity and ethical values, particularly of top management, are developed and understood and set the standard of conduct for
financial reporting. All strongly and unquestionably related to the "tone at the top" set by management 2013 Coso update (5 additional principles) The organization demonstrates a commitment to integrity and ethical values. Audit Comittee A subcommittee of the board of directors that is generally composed of three to six "outside" members of the organization's board of directors. Each member must be financially literate, and one member must be a financial expert. Some of the more important duties of the audit committee are Appointment, compensation, and oversight of the public accounting firm conducting the entity's audit. Business Risk those factors, events, and conditions that could prevent the organization from achieving its business objectives professional standards require the auditor to specifically gain an understanding of the risk assessment process as it relates to financial reporting risks, including fraud risk. When gaining such an understanding, the auditor should determine whether management is actually assessing the likelihood of fraud risks and how they are managing such risks control activities the specific actions taken by a client's management and employees to help ensure that management directives are carried out following four things should be kept n mind when following principle related to control activities ... Information tech Information technology. Has the audit client taken full advantage of significant advances in information technology by using entirely automated control activities whenever it is efficient and effective? Level of integration with their risk assessment process. Has the audit client's management team taken the action necessary to address the identified risks to the achievement of financial reporting objectives? Selection and development of control activities . Control activities are selected and developed considering their cost and their potential effectiveness in mitigating the risks identified Policies and procedures. Have the policies related to reliable financial reporting been documented and communicated throughout the company? Preventative controls The activities that prevent misstatements before they occur, detective controls The activities that detect misstatements after they occur Performance reviews something like budget Separation of duties ARRCS next four Authorization to execute transactions. This duty belongs to people who have the authority and the responsibility for initiating or approving transactions. Authorization may be general, referring to a class of transactions (e.g., all purchases up to $100,000), or it may be specific (e.g., sale of a major asset). Recording transactions. This duty refers to the accounting and record-keeping function, which in most organizations is delegated to a computerized information system. People who control computerized processing are the record keepers Custody of assets involved in the transactions . This duty refers to the actual physical possession or effective physical control of property. Periodic reconciliation of existing assets to recorded amounts. This duty refers to making comparisons at regular intervals and taking appropriate action with respect to any differences Physical access physical access to assets and important records, documents, and blank forms should be limited to authorized personnel. even running software check Information Processing Control Activities Information processing control activities are essential to the effectiveness of an internal control system. Generally, all organizations employ computerized information processing on a routine basis. When entities use computerized information processing, the professional standards make clear that information technology (IT) poses specific risks to an entity's internal control system. Information System An entity's system, usually built on some type of technological platform that has been designed to produce the information necessary for the entity to operate and control its business operations. Needs to be timely, relaible and relevant Fundamental Principles of Monitoring Ongoing
and separate evaluations. Ongoing evaluations of controls that are separate from other types of evaluations (e.g., operational) enable management to determine whether the other components of internal control continue to function over time. Monitoring controls Periodic evaluation of controls by internal audit. Gaining an understanding of internal controls should be performed in a "top-down" risk-based manner that first identifies significant accounts and disclosures and their relevant assertions account's significance is based on its inherent risk (i.e., the likelihood of containing a material misstatement before the consideration of internal control or "what could go wrong" Relevant assertions are those that represent the possibility of a material misstatement Entity Levle Controls start with examining this. the controls that are pervasive to the financial statements taken as a whole, transaction level controls the controls that relate to specific classes of transactions, account balances, and disclosures. Do walk through to evaluate design effectiveness. Design Effectiveness determines whether the controls over financial reporting, if operating effectively, would be expected to prevent or detect errors or fraud that could result in a material misstatement in the financial statements Walkthrough Consists of a combination of inquiry of personnel, observation of an entity's operations, and document examination while tracing one or more transactions through the audit trail from initiation of the transaction to its inclusion in the financial statements.
Operating effectiveness refers to whether the control is operating as designed and whether the person performing the control possesses the necessary authority and qualifications to perform the control effectively Internal Controls Questionnaire The audit documentation that uses a checklist of internal control-related questions to gain and document an understanding of the client's internal control narrative description The audit documentation that describes the environmental elements, the accounting system, and the control activities in an entity's internal control flowchart The audit documentation that provides a visual display of the accounting system and control activities in an entity's internal control system least persuasive to most persuasive types of evidence Inquiry of client personnel. if the audit team wants to achieve a lower control risk assessment, more persuasive evidence is needed tes of controls deisgned to test in two ways sometimes completeness direction, ex which the audit team is interested in ensuring that all valid hours are included in the entity's payroll; as a result, time logs (which represent valid hours worked) are traced to payroll department files and the payroll register (which represents hours included in the payroll). occurrence test of payroll is to ensure that all labor hours included in the payroll (represented by the payroll register) were actually worked (represented by time logs). substantive procedures detailed audit and analytical procedures designed to detect material misstatements in account balances and footnote disclosures dual purpose tests An audit procedure used as both a test of controls and a substantive test, Sets with similar termsAuditing and Assurance Services CH 5 key terms28 terms Szeto66PLUS Chapter 5: Internal Control51 terms emilyy1831 ACC 451 Chapter 643 terms haynejay Chapter 5 Auditing49 terms thechawking Sets found in the same folderAudit Chapter 154 terms lyndsey_brignac Auditing Ch. 4 (4)15 terms jack_day8 Accounting 10218 terms DannyM24 ACCT 460 - Module H Quiz25 terms jny32259 Other sets by this creatorequations124 terms aleigha_mattison Acronyms plus important terms36 terms aleigha_mattison RATIOS!!!23 terms aleigha_mattison Equations6 terms aleigha_mattison Recommended textbook solutionsInformation Technology Project Management: Providing Measurable Organizational Value5th EditionJack T. Marchewka 346 solutions
Human Resource Management15th EditionJohn David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine 249 solutions
Operations Management: Sustainability and Supply Chain Management12th EditionBarry Render, Chuck Munson, Jay Heizer 1,698 solutions
Information Technology Project Management: Providing Measurable Organizational Value5th EditionJack T. Marchewka 346 solutions Other Quizlet setsSample Questions Midterm21 terms John_Almerico Ch 1. intro to the field of OB21 terms Jerion Intro to Family Theory Final Exam106 terms Bryce710 Six Sigma Project Management Quiz 1220 terms eatballsSSSS Related questionsQUESTION View that displays a small image of the contents of each file. Icons - view that displays the items with icons above the file names. 3 answers QUESTION The most controversial impasse resolution procedure short of a strike is: 3 answers QUESTION Which automotive company is credited with founding the modern school of Lean thought? 15 answers QUESTION A company dress code and award ceremonies would be part of 15 answers Who is responsible for establishing and maintaining internal control system?Management is responsible for establishing internal controls. In order to maintain effective internal controls, management should: Maintain adequate policies and procedures; Communicate these policies and procedures; and.
Who is responsible for establishing and maintaining the internal control system a the internal auditor B the accountant C management d the external auditor?The external auditor is responsible for establishing and maintaining the internal control system. 7.
Who maintains internal control?Management Responsibility: Administrative management is responsible for maintaining an adequate system of internal control. Management is responsible for communicating the expectations and duties of staff as part of a control environment.
Who is responsible for a company's internal control system quizlet?A) A company's outside auditor is responsible for the company's internal control system. B) One of the major purposes of internal control is to ensure that the assets are safeguarded. C) Internal control procedures tend to diminish the importance of operational efficiency.
|
Who is responsible for establishing and maintaining the internal control system quizlet?
zusammenhängende Posts
Urheberrechte © © 2024 ihoctot Inc.
