Internal Controls, Risk & Business Process Flashcards
Which components of ERM addresses an entity’s process for establishing the likelihood and impact of events? (COSO framework)
The Performance components includes analyzing risk and establishing the likelihood and impact
Risk Acceptance
Firm will take no action in case of an event (self-insuring)
Which component of internal controls addresses an entity’s financial reporting competencies? (COSO framework)
Control Environment component of internal control includes financial reporting competencies, human resources, organizational structure
Which component of internal controls addresses an entity’s policies and procedures? (COSO framework)
Control Activities Component
Inherent Risk
Is the risk to an entity in the absence of any action management might take
Control Environment (3) COSO Framework
(1) Tone at the top
(2) Processes, standards, and structures for effective internal controls
(3) Organizational structure
Risk assessment (3) COSO framework
(1) how an entity identifies and analyze risks
(2) assessing the potential fraud
(3) identifying and assessing changes that could affect internal controls
Information and Communication (3) COSO framework
(1) obtaining and using information to support internal controls
(2) internal communication
(3) external communication
Monitoring Component (2) COSO framework
(1) evaluation of the quality of internal controls by assessing systems designs
(2) ongoing and separate evaluations
Control Activities (2) COSO framework
(1) development of technologies
(2) deployment of policies and procedures
Section 404 (Sarbanes-Oxley Act)
(1) Transparency of Financial Statements
(2) Comprehensive review of Internal Controls
(3) Using COSO Framework such as; control environment, information and communication procedures
