Topic_8_Internal_Controls_Flashcards
(10 cards)
What are the five components of the COSO framework?
Control environment, risk assessment, control activities, information and communication, monitoring.
What is segregation of duties?
Separating authorization, recordkeeping, and custody roles to reduce fraud.
What are examples of physical safeguards?
Vaults, security cameras, backup records.
What is the purpose of independent checks?
To detect errors and fraud by reviewing work.
What does the Sarbanes-Oxley Act require of CEOs and CFOs?
To personally certify the accuracy of financial statements.
What is the PCAOB?
A board created to oversee auditors of public companies.
What are auditors’ roles in internal control?
Evaluate systems, detect fraud, ensure compliance, and certify financials.
What’s the difference between preventive and detective controls?
Preventive controls stop errors/fraud before they happen; detective controls find them after.
What is earnings management?
Adjusting timing, estimates, or methods to smooth income—can be ethical or deceptive.
Why is ethical behavior essential in accounting?
Because GAAP allows discretion, integrity ensures transparency and trust.
