COSO components examples

Question 1

Monitoring

Answer 1

are functions functioning, are they operating effectively

Question 2

control activities

Answer 2

• preventive = procedures
• detective = analytical reviews
• direct = checking work
• indirect = evaluations

Question 3

risk assessment

Answer 3

identifying potential risks to a firm’s operations, evaluate likelihood and impact of these risks. Based on that a firm can develop strategies to mitigate or manage these risks

Question 4

control environment

Answer 4

organization’s culture with respect to internal control, example ethical values or management philosofie

Question 5

How to make sure inventory is correct

Answer 5

reconciliation - does physical count matches the clien’t general ledger account

cutoff - are there items in the inventory which should not be included in the inventory / right time period

duplicates/omissions

Question 6

closed cycle

Answer 6

one item influences another item

Question 7

narrative report record-to-report process

Answer 7

after goods are purchased, the inventory account is updated. The same inventory is updated after goods are sold. Selling goods also updates the accounts receivable. Receiving cash from custeromers also updates two accounts: the accounts receivables and the cash account. The cash account is also updated by cash paid to suppliers. The cash paid to suppliers also updates the account payables, which is also updated by purchases that are made

Question 8

narrative report purchase-to-pay process

Answer 8

it starts when a purchase request is made. This triggers the creation of a purchase order which contains information on the products required and prices. Once the goods arrive a receiving report is created containing the products received. The inventory file is updated to show that we now have the goods. A purchase invoice is received from the supplier. With the information from the purchase invoice, the payment of the supplier can be made

Question 9

narrative report production process

Answer 9

it starts when the design department designs a product with product specifications related to its components and information on how to assemble the product. The planning made by a production planning department leads to a production schedule. The information in the product specifications and the production schedule is used to create a product order. The product order triggers the production of the goods and the tracking of the labor, materials, and overhead in the production. The overhead sheets, time sheets and material requisition documents feed into a production report, which populates a production cost sheet

Question 10

narrative report order-to-cash process

Answer 10

it starts with a customer making a request for goods. This triggers the creation of a sales order, which contains the items ordered, their quantities and prices. With the information from the sales order, a warehouse picking ticket is created and the requested items are collected and packet for delivery. The goods to be delivered are transferred to the shipping department, which leads to the creation of a shipping note which will accompany the goods delivered to the customer. The goods are then shipped to the customer and an invoice is created for the sale. In the end the customer pays for the goods, so cash is received through a cash receipt