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1

Articles of incorporation include

corporation name
# shares authorized
street address of corporation's initial registered office
name of registered agent @ office
name & address of each incorporator

2

Additional provision aoi may include

purpose & power of corp
internal mgt
subject matter allowed to be addressed in the bylaws

3

bylaws

provision for managing the business

states authorirty of officers/directors, selection process, term length, pay, how to decide to issue new stock

4

Shareholders

-required to hold annual meeting, need special meetings for important issues (mergers, etc.)
-@ annual meeting may amend aoi, vote, elect/remove officers

5

BOD

-select/remove officers
-decisions wrt capital structure
-add/amend/repeal bylaws
-initiate changes (m&a)
-decide to declare/distribute dividends
-set mgt comp
-coordinate audit activities
-evaluate & manage risk

6

Fiduciary duty

Directors owe fiduciary duty
fiduciary- legal duty to act for benefit of corp, held to higher std of care
fiduciary duty req directors & officers to be
-act in corp best interest, be loyal, use due diligence wrt responsibilities, disclose conflicts of interest

7

Officers

resp for day to day ops
CEO selected by & report to BOD
CEO selects other execs; officers are agents (fiduciary duty)

8

internal auditors

IA assess make recomm for improving governance to achieve
-promote ethics & values
-ensure effective org performance mgt & accountability
-communicate risk & ctrl info
-coordinate activities/info among BOD, ext/int auditors, mgt

9

Audit committee

-address complaints wrt acctg & audit
-receive reports about acctg policies, material alt treatments, effects of at disclosures, treatments preferred by ext auditors

10

Section 302

-f/s free from material misstatements
-responsible for IC & evaluate for effectiveness
-inform audit committee & auditors of significant ctrl def, fraud (material or not)
-significant changes were (or weren’t) made wrt IC (including corrective ctrl)
intentional violations can result in forfeiting bonus/incentive based compensation

11

Section 404

report contains statement by CEO/CFO that includes
-mgt takes responsibility for establish/maintain system of IC
-name of IC model used to design/assess effectiveness (COSO)
-evaluate IC effectiveness
-statement pubic acctg firm registered w/ PCAOB

12

Section 407

each audit committee must have financial expert if not, disclose reason
financial experts must
-know GAAP & F/S
-experience in prep of F/S of comparable issuers & application of principles wrt acctg estimates, etc.
-experience w/ internal acctg ctrls
-understand audit committee functions

13

Section 906

corp responsibility for financial reports
certify filings into U.S. Code
criminal penalties for unkwnowing & knowing noncompliance for filing
-knowing- fines up to $5M and/or up to 20 yrs in prison
-unknowing- fines up to $1M and/or up to 10 yrs in prison

14

Whistleblowers

SOX & Dodd-Frank, SEC may pay for info other than from audit or investigation
-may sue retaliating employers
-claims asserted for up to 180 days
-trial by jury allowed
-rights & remedies can’t be waived (i.e. employment contract)

15

Internal Control & it's objectives

-has 3 classes of objectives (ORC)
-ongoing
-effected by all ppl in org
-provide only reasonable assurance
-adaptable to entity’s structure

16

Operations (mission)

-improving financial perf, productivity, quality, innovation, customer satisfaction
-includes safeguarding assets (assist in risk assessment; avoid waste/inefficiency)
Pitch Perfect is quality comedy (P P I Q C)

17

Reporting

- timely, reliable info needed for DM & stakeholders
-relate to financial/nonfinancial & internal/external reporting

18

Compliance

subject to laws/regs that have minimum stds of conduct
-compliance with internal policies/procedures is an operational objective

19

Control Environment

-Integrity & ethical values (tone @ top, stds of conduct, perf eval, correct deviations)
-oversight (operates independently)
-establ of structures, reporting lines, authorities & resp (design, assign, limit authority)
-commitment to attract, develop, retain competent indiv
-org holds indiv accountable

20

Risk Assessment

assessment of risk & need to manage org change
principles
specifies objectives to ID & assess objectives
ID & analyze risk,
assess fraud risk,
ID & assess changes that affect IC

21

Risk Assessment objectives

operations- mgt choice, risk tolerance, op & financial perf goals, basis for committing resources
ext f.reporting- comply w/ stds, materiality, reflect activities
ext nonf reporting- comply w/ stds/frameworks, consider preclusion, reflect activities
internal reporting- mgt choices, precision, reflect activies
compliance- ext laws/regs, risk tolerance

22

Control Activities

policies, procedures ensure mgt directive carried out.
applied @ various level
preventive or detective, segregation of duties

23

3 principles of control activities

select/develop c.a. to mitigate risk
select/develop general c.a. over tech to support achievement of objectives
deploys c.a. thru policies that establish expectations & procedures that put policies into action

24

Information & Communication

enable org to obtain info to maintain accountability, measure & review perf

3 principles
-relevant, quality info (ext & int)
-internally communicates info
-communicates with external parties

25

Monitoring

process assesses quality of IC perf over time to ensure controls continue to meet needs of org
2 principles
-develops & performs ongoing/sep (both) to determine if components IC are present & functioning
-evaluates & communicates ctrl deficiencies

26

3 components for COSO

establish foundation for monitoring
-tone @ top
-org structure
-baseline for IC effectiveness
Design/execute monitoring procedures based on risks to achieve org obj
-prioritize risk
-ID ctrl
-ID persuasive info
-implement monitoring procedures
assess/report results & include follow up on corrective action
-prioritize findings
-report results
-follow up

27

Control Baseline

starting point
supported understanding of current system's design & operation

28

Change ID

IDs & addresses changes needed

29

Change management

evaluates design & implementation of changes (establishes new baseline)

30

Control revalidation

update periodically
revalidates proper operation of system at a time when no known changes occurred