Chapter 7 Flashcards
(22 cards)
Internal Control
organizational plan and related measures adopted by an entity to follow SEEP
SEEP
S: safeguard Assets
E: encourage employees to follow company policies
E: ensure accurate, reliable accounting records
P: promote operational efficiency
Committee of Sponsoring Organizations (COSO)
provides thought leadership related to enterprise risk management, internal control, and fraud deterrence
Sarbanes Oxley Act
- requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports
- CEOs must sign off on accounting
- updated whistleblower policies
- Firms cannot audit and consult at the same time
Public company accounting oversight board (PCAOB)
oversees auditors and what they are doing
Control Procedures
component of internal control that helps ensure business goals are achieved
Firewalls
limits access to local network
Encryption
rearranges data by mathematical process
Environment
a companies CEO and top managers must behave honorably to set a good example
Information System
information cannot properly be gathered and summarized without one
Separation of Duties
the same person who opens the bank statement should not be the person who reconciles cash as well
Collusion
two or more people working together to overcome internal controls
Documents
should be pre numbered to prevent theft and inefficiency
Audits
examination of a companies financial statements and accounting system by s trained professional
Operational Efficiency
part of internal control that ensures resources are not wasted
Risk assessment
identification of uncertainties that may arise due to a companies products, services, or operations
CRIME
components of internal controls
C
control procedures
- having competent personnel
- assignment of representation
- separation of duties
- internal and external audits
- documentation
- electronic devices
- job rotation
R
risk assessment
- the higher the risk the more controls
I
information systems
-having different computing systems
- different access for different users
M
monitor of controls
E
environment
- tone at the top
- how management cares about internal controls
