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AC 340-Chapter 7
Baxter's Midterm 2
27
Accounting
Undergraduate 3
03/07/2011

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Term
Organizational Governance
Definition
process by which organization select objectives, establish processes to achieve objectives, and monitor performance.
Term
Objective Setting
Definition
This includes defining a mission, vision, purpose, and strategies to establish relationships.
Term
Processes to achieve objectives
Definition
essential internal controls and monitoring activities. To review performance and provide feedback to provide a reasonable assurance that objectives are being achieved.
Term
Enterprise Risk Management(ERM)
Definition
process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may effect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
Term
4 categories of management objectives
Definition
1. Strategic- High level goals aligned with and supporting its mission
2. Operations- Effective and efficient use of its resources
3. Reporting- reliability of reporting
4. Compliance- compliance with applicable laws and regulations.
Term
Eight Components of ERM
Definition
1. Internal Environment
2. Objective Setting
3. Event Identification
4. Risk Assessment
5. Risk Response
6. Control Activities
7. Information and Communication
8. Monitoring
Term
Internal Environment
Definition
encompasses the tone of an organization and sets teh basis for how risk is viewed and addressed by an entity's people, including risk management philosophy and risk appetite, integrity and ethical values, and the environment in which they operate
Term
Objective Setting
Definition
objectives must exist before management can identify potential events affecting their achievement. ERM ensures that management has a process in place to set objectives and that the chosen objectives support and align with the entity's mission and are consistent with its risk appetite.
Term
Event Identification
Definition
Internal and external events affecting achievement of an entity's objectives must be identified, distinguishing between risks and opportunities. Opportunities are channeled back to managements strategy or objective-setting processes.
Term
Risk Assessment
Definition
Risks are analyzed, considering likelihood and impact, as a basis for determining how they should be managed. Risk are assessed on an inherent and residual basis
Term
Likelihood
Impact
Definition
1. possibility that an event will occur
2. the effect of an event's occurrence.
Term
Risk Response
Definition
management selects from one of four response types:
1. Avoid it by leaving the activity
2. Reduce it by taking actions that reduce the likelihood of the event.
3. Share it by buying insurance or outsourcing
4. Accept risk by taking no action.
Term
Residual Risk
Definition
the risk that remains after one of these responses is chosen.
Term
Control Activities
Definition
policies and procedures that help ensure that risk responses are carried out. These controls include approvals, authorizations, verifications, reconciliations, reviews of operating performance, security procedures, and segregation of duties.
Term
Information and Communication
Definition
pertinent info must be identified, captured, and communicated in a form and timeframe that enable people to carry out their responsibilities.
Term
Monitoring
Definition
ERM process and its components are evaluated-via ongoing management activities, separate evaluations, or both-to determine its effectiveness and to make necessary modifications.
Term
Sarbanes-Oxley Act of 2002(SOX)
Definition
affects managers, independent auditors, and other players who are integral to capital formation in the United States.
There are 11 parts to this
Term
Title I- Public Company Accounting Oversight Board
Definition
PCAOB- is an independent board to oversee public company audits. Oversight and Enforcement authority over the board to the SEC
Term
Title II- Auditor Independence
Definition
Auditor Independence- prohibits a CPA firm that audits a public company to engage in certain nonaudit services with same company. (financial information systems design)
Term
Title III-Corporate Responsibility
Definition
Requires CEO and CFO to certify reports and say that they are not misrepresented. Also they are responsible for establishing, maintaining, and reporting on effectiveness of controls.
Term
Title IV- Enhanced Financial Disclosures
Definition
Each annual report filed with SEC to include internal control audit. Has managements assessment of effectiveness of internal control and procedures for reporting.
Term
Title V-Analysts Conflicts and Interests
Definition
financial analysts must properly disclose in research reports and conflicts of interest they might hold with the companies they recommend.
Term
Title VI- Commission Resources and Authority
Definition
authorizes SEC to censure or deny any person the privilege of appearing or practicing before the SEC if that person is deemed to be unqualified, have acted in an unethical manner, or have aided and abetted in the violation of federal securities laws.
Term
Title VII-Studies and Reports
Definition
Authorizes General Accounting Office(GAO) to study the consolidation of public accounting firms since 1989 and offer solutions to any recognized problems.
Term
Title VIII-Corporate and Criminal Fraud Accountability
Definition
Felony to knowingly destroy, alter, or create records or documents with the intent to impede, obstruct, or influence and ongoing or contemplated federal investigation. Also offers legal protection to whistle blowers. 25 years of imprisonment.
Term
Title IX-White Collar Crime Penalty Enhancements
Definition
CEOs and CFOs certify that info contained in periodic reports fairly represents, in all material respects, the financial condition and results of the company's operations.
Term
Business Process Management(BPM)
Definition
handles the connections between processes to maintain the integrity of data moved among these processes.
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