Transcript Chapter 4 Internal Control - California Polytechnic State

Chapter 4
Internal Control
Bus 319
Accounting Information Systems
Megan
What is the Foreign Corrupt Practice Act of 1977
Foreign Corrupt Practice Act of 1977
A process designed by, or under the
supervision of, the issuer’s principal executive
and principal financial officers, … , to provide
reasonable assurance regarding the reliability
of financial reporting and the preparation of
financial statements for external purposes in
accordance with GAAP and includes those
policies and procedures that:
Foreign Corrupt Practice Act of 1977
1.
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the assets of the issuer;
2.
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the issuer are being made only
in accordance with authorizations of management and directors
of the registrant; and
3.
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
issuer’s assets that could have a material effect on the financial
statements.
Jen C
What is the Sarbanes-Oxley Act of 2002
What is the Sarbanes-Oxley Act of 2002
• Management must:
– assess and test the effectiveness of the internal controls
– report their findings on the effectiveness of the internal controls
• The independent auditor must:
– assess and test the effectiveness of the internal controls
– report their findings on the effectiveness of the internal controls
Matt S
What are the four primary components of
Brown’s taxonomy of risk
Brown’s Taxonomy of Risk
• Financial Risk
• Operational Risk
• Strategic Risk
• Hazard Risk
Preston
Can you name the three elements of
Financial Risk
Brown’s Taxonomy of Risk – Financial Risk
• Financial Risk
– Market risk
– Credit risk
– Liquidity risk
Vincent
Can you name the two elements of
Operational Risk
Brown’s Taxonomy of Risk – Operational Risk
• Operational Risk
– Systems risk
– Human error
Yannine
Can you name the two elements of
Strategic Risk
Brown’s Taxonomy of Risk – Strategic Risk
• Strategic Risk
– Legal and regulatory risk
– Business strategy risk
Erika
Can you name the element of
Hazard Risk
Brown’s Taxonomy of Risk – Hazard Risk
• Hazard Risk
– Directors’ and Officers’ liability
Allie
Can you name the five components of
the COSO internal control framework
COSO Internal Control Framework
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Control environment
Risk Assessment
Control Activities
Information & communications
Monitoring
Wesley
Can you name the five
Control Activities
Control Activities
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Adequate documentation
Background checks
Backup computer files
Backup power supplies
Bank reconciliation
Batch control totals
Data encryption
Document matching
Edit checks
Firewalls
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Insurance and bonding
Internal audit
Limit checks
Lockbox systems
Physical security
Preformatted data screens
Prenumbered documents
restrictive endorsement
Daily deposit of checks
Segregation of duties
Training
Victoria
Can you name the eight components of
Enterprise Risk Management framework
Enterprise Risk Management Framework
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Internal Control environment
Objective Setting
Event Identification
Risk Assessment
Risk Response
Control Activities
Information & communications
Monitoring