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Accounting Information Systems
Key Terms-Ch.6
16
Accounting
Undergraduate 1
09/23/2010

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Cards

Term
Threat
Definition
occurrence or wanted event that could have negative effects on an entity
Term
Exposure
Definition
The potential dollar loss that could result from a threat
Term
Impact
Definition
The potential dollar loss that could result from a threat
Term
Likelihood
Definition
Probability a threat will occur
Term
Internal control
Definition
Process implemented by board of directors and management used to try to reasonably assure that control objectives are achieved
Term
Preventative controls
Definition
deter problems before they arise
Term
Detective controls
Definition
used to discover problems once they arise
Term
Corrective controls
Definition
used to fix problem once it has occurred and has been discovered
Term
General control
Definition
make sure an organization's control environment is stable and well-managed
Term
Application controls
Definition
prevent, detect, and correct transaction errors and fraud
Term
Sarabanes-Oxley Act
Definition
intended to
(1)prevent financial statement fraud
(2) make financial reports more transparent
(3) strengthen the internal controls at public companies
(4)punish executives who perpetuate fraud
Term
Effects of Sarbanes-Oxley Act on:
PCAOB, auditors, audit committees, management, and internal control requirements
Definition
PCAOB: appointed by SEC--they set and enforce auditing standards for public accounting

auditors: have to report to audit committee, can't perform some non-audit services, stricter independence rules

audit committee: members must be on board of directors, have at least one financial expert. They are in charge of hiring, paying... for internal auditors

management: has to sign off saying that to their knowledge, the statements are correct. have to assess internal controls on report. they can be fined if these are signed incorrectly if they have full knowledge

internal controls: issue a report with statements saying that management is responsible for controls--auditor and management both have to assess controls
Term
Diagnostic control system
Definition
measures companies progress by comparing planned and actual performance
Term
interactive control system
Definition
a control tool for managers--helps them monitor changes, make changes
Term
COBIT
Definition
Control Objectives for Information and related technology

Issues of control
(1) business objectives
(2) IT resources: people, systems, technology...
(3) IT processes
Term
COSO's internal Control Framework
Definition
defines internal controls and provides guidance in evaluating the controls and enhancing them

Five Components:
1. Control Environment
2. Control Activities
3. Risk Assessment
4. Information and Communication
5. Monitoring
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