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CPA BEC > Corporate Governance & Internal Control > Flashcards

Corporate Governance & Internal Control Flashcards

1
Q

According to COSO, what are the stages in the monitoring-for-change continuum?

A 
Maybe:
Control Baseline
Change Identification
Change Management
Control Revalidation/Update
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2
Q

According to COSO, what are the components of internal control?

A 
Control Environment
Control Activities
Risk Assessment
Monitoring
Information/Communication
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3
Q

What did the Dodd-Frank Act of 2010 do for Whistleblower’s rights?

A

Extended OSHA complaint filing time for 90 to 180 days
Extended the right to sue to whistleblowing employees of private subsidiaries controlled by public companies
Extended whistleblowers the right to a jury trial in retaliation cases properly filed in federal court

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4
Q

Why do internal controls need to be monitored?

A 
Machines fail
People forget
People get lazy
People quit their jobs
Technology advances
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5
Q

What is COSO and it’s guidance?

A

The Committee of Sponsoring Organizations of the Treadway Commission developed the Internal Control Intergrated Framework

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6
Q

What is the IIA and it’s guidance?

A

The Institute of Internal Auditors developed the International Professionals Practice Framework?

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7
Q

How often are external assessments required for internal auditors?

A

At least once every 5 years

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8
Q

What is the best method for prioritizing risk?

A

Expected value:

Probability * amount

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9
Q

According to the IIA, what are some of the organizational objectives that should be improved by internal auditing?

A

Control
Governance
Risk Management

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10
Q

According to the IIA, explain the key parts of the definition of internal auditing.

A

Internal auditing helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

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11
Q

What are the internal auditing standards?

A

Maybe:
Attribute
Implementation
Performance

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12
Q

What must a company’s CFO and CEO certify?

A

They reviewed the company’s 10-K
The 10-K does not contain any material misstatements
They are responsible for the company’s internal controls

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13
Q

What did the Dodd-Frank Act of 2010 require of compensation committees of the board of directors?

A

All members must be independent

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14
Q

According to SOX of 2002, what is required to be an audit committee financial expect?

A

Section 407 explains that the person should have through education and experience 1) an understanding of GAAP and financial statements 2) experience in preparation of financial statements and application of principles relating to accounting for estimates, accruals, and reserves 3) experience with internal accounting controls, and 4) an understanding of audit committee functions.

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15
Q

According to COSO, why do control systems fail?

A

Improper design or implementation
Environmental changes that make controls ineffective
Operations have changed which make them ineffective

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16
Q

According to COSO, what are the risk responses?

A

Risk Acceptance
Risk Avoidance
Risk Reduction
Risk Sharing

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17
Q

What are the components of COSO ERM?

A 
Control Environment
Control Activities
Risk Assessment
Monitoring
Information/Communication

Operations Objectives
Reporting Objectives
Compliance Objectives

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18
Q

What standard distinguishes between requirements for assurance and consulting services?

A

Implementation Standards

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19
Q

What are the advantages of using an ERM system?

A

Helps organizations seize opportunities
Improves the use of capital
Reduces operational surprises

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20
Q

What are the limitations of an ERM system?

A

Collusion
Management override
Risk relates to the future which is uncertain

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21
Q

According to the IIA’s Framework, what elements of their guidance is considered mandatory?

A 
Code of Ethics
Core Principles
International Standards
Definition of Internal Auditing
(PIED)
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22
Q

According to the IIA’s Framework, what elements of their guidance is considered recommended?

A

Implementation Guidance

Supplemental Guidance

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23
Q

What must a company’s CFO and CEO certify?

A

They reviewed the company’s 10-K
The 10-K does not contain any material misstatements
They are responsible for the company’s internal controls

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24
Q

What did the Dodd-Frank Act of 2010 require of compensation committees of the board of directors?

A

All members must be independent

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25
Q

According to SOX of 2002, what is required to be an audit committee financial expect?

A

Section 407 explains that the person should have through education and experience 1) an understanding of GAAP and financial statements 2) experience in preparation of financial statements and application of principles relating to accounting for estimates, accruals, and reserves 3) experience with internal accounting controls, and 4) an understanding of audit committee functions.

26
Q

According to COSO, why do control systems fail?

A

Improper design or implementation
Environmental changes that make controls ineffective
Operations have changed which make them ineffective

27
Q

According to COSO, what are the risk responses?

A 
Risk Acceptance
Risk Avoidance
Risk Reduction
Risk Response
Risk Sharing
28
Q

What are COSO’s components of ERM?

A 
Control Environment
Control Activities
Risk Assessment
Monitoring
Information/Communication
\+3
29
Q

What standard distinguishes between requirements for assurance and consulting services?

A

Implementation Standards

30
Q

What are the advantages of using an ERM system?

A

Helps organizations seize opportunities
Improves the use of capital
Reduces operational surprises

31
Q

What are the limitations of an ERM system?

A

Collusion
Management override
Risk relates to the future which is uncertain

32
Q

According to the IIA’s Framework, what elements of their guidance is considered mandatory?

A

Code of Ethics
Core Principles
International Standards
Definition of Internal Auditing

33
Q

According to the IIA’s Framework, what elements of their guidance is considered recommended?

A

Implementation Guidance

Supplemental Guidance

34
Q

What are the primary themes of the Attribute Standards?

A

1) Purpose, Authority, & Responsibility
2) Independence & Objectivity
3) Proficiency & Due Professional Care
4) Quality Assurance & Improvement Program

35
Q

What is Standard 2000 of the Performance Standards?

A

Managing the Internal Audit Activity

36
Q

Describe the general theme of the Performance Standards related to Standard 2000?

A

The Standards explain the chief audit executive’s responsibilities for overseeing the internal audit activity and for adding value to the organization

37
Q

According to the IIA, what competencies should the internal audit function have?

A

Evaluating Fraud Risk
IT Audit Techniques
Key IT Risks

38
Q

According to SOX, who must be a part of a Public Company’s audit committee?

A

A Financial Expert

39
Q

According to COSO’s definition, what are the categories of objectives in Auditing Standards?

A

Reliability of Financial Reporting
Effectiveness & Efficiency of Operations
Compliance with Applicable Laws & Regulations
(Reorting/Operations/ Compliance)

40
Q

According to the Dodd-Frank Act, what disclosure is required?

A

Disclosure of why or why not the chairman of the board is also the CEO

41
Q

According to COSO, what relates to risk management?

A

Change Management
Fraud
Organization Objectives
Risk Assessment

42
Q

What are the IT controls classifications?

A

Preventive
Detective
Corrective

43
Q

According to COSO, what does monitoring relate to?

A

Addressing control deficiencies

Establishing ongoing and periodic evaluations

44
Q

According to COSO, what are the control environment factors?

A

Integrity/Ethical Values
Commitment to competence
HR policies & practices
Assignment of authority & responsibility
Management philosophy & operating style
Board of directors or audit committee participation
Organizational structure

45
Q

In a large public corporation, who should have the responsibility of evaluating internal control procedures?

A

An independent internal audit staff who reports to the board of directors or an audit committee

46
Q

What are the keywords related to the IIA’s Code of Ethics principles?

A

Integrity
Objectivity
Confidentiality
Competency

47
Q

What are the goals of risk management?

A

Aligning risk appetite with strategy
Reducing operational surprises and losses
Seizing opportunities through better identification and management

48
Q

According to Dodd-Frank, what is the range of mandatory awards issued for original information regarding securities fraud

A

10%-15% of imposed sanctions

49
Q

According to the COSO cube model, what are the control objectives?

A

Operations
Reporting
Compliance

50
Q

According to SOX, when does the firm have to provide an explanation regarding the financial expert?

A

If the audit committee does not have one.

51
Q

According to COSO, what is the definition of Internal control?

A

A process affected by an entity’s board of directors, management, and other personnel designed to provide reasonable assurance regarding the achievement of objectives in 1)reporting 2)operations 3) compliance

52
Q

According to COSO, what is the definition of Internal control?

A

A process affected by an entity’s board of directors, management, and other personnel designed to provide reasonable assurance regarding the achievement of objectives in 1)reporting 2)operations 3) compliance

53
Q

According to COSO, what is the definition of Internal control?

A

A process affected by an entity’s board of directors, management, and other personnel designed to provide reasonable assurance regarding the achievement of objectives in 1)reporting 2)operations 3) compliance

54
Q

What is GAAS?

A

Generally Accepted Auditing Standards

55
Q

What is a trading specialist vs a market maker?

A

A specialist is a NYSE member acting as a dealer for a small number of securities and a market maker does the same for the OTC market

56
Q

Who requires the independent auditor to study the internal controls of a public company?

A

GAAS and SOX

57
Q

What does NASDAQ require of all listed companies?

A

Requires that listed companies have audit committees with only independent directors

58
Q

What is SOX and who does it apply to?

A

Sarbanes-Oxley Act of 2002 and it applies to all SEC registrants

59
Q

What does the NYSE require of all listed companies?

A

A code of conduct must be adopted by the governing board and made public

60
Q

What are open-end fund vs closed-end funds?

A

Open-ended fund are mutual funds and their size changes, closed-

CPA BEC (5 decks)

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