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Definition
| an elaborate system of checks and balances whereby a company's leadership is held accountable for building shareholder value and creating confidence in the financial reporting process (elaborate system of checks and balances) |
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| the set of values and behaviors in place for the corporate leaders |
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| people who have some form of involvement or interest in the business, can be internal or external |
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Definition
| own a portion of the company |
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| those who have an ownership interest in the company or who CONSIDER obtaining ownership. also, all shareholders are investors, but not all investors are shareholders. |
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| responsible for protecting the interests of investors by making sure that public companies provide complete and transparent financial info |
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| formed the Committee of Sponsoring Organizations (COSO) |
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| the system of checks and balances (corporate governance) includes 4 interrelated functions |
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Definition
| management oversight, internal controls and compliance, financial stewardship, and ethical conduct |
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Term
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Definition
policies and procedures in place to lead the directorship of the company. needs good communicators with a top down approach. even the CEO must report to someone (the board of directors)
oversight should be in place at every level to ensure corruption does not bleed into the corporation |
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Term
| internal controls, control mechanisms (2) |
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Definition
1. dictate the manner in which responsibilities are assigned to people in the company
2. ensure the company is fulfilling its obligations with respect to adherence to accounting conventions and regulations |
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Definition
| correctness of information, info should be verifiable and proper |
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| how clearly the financial info can be understood, must be delivered in a timely manner |
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Term
| 6-step internal control process |
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Definition
1. define key activities
2. define the goals
3. obtain input from experienced users
4. write down the details of the controls
5. test the effectiveness of the controls
6. strive for continuous improvement |
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Definition
| a special obligation of trust, esp. with respect to the finances of another |
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| the manner in which an agent handles the affairs/finances of another (in this case the shareholders) |
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Definition
the act of manipulating financial information in such a way to shed more favorable light on the company or its management than is actually warranted
1.early recognition of revenues
2. early shipment of products.
3. falsification of customers
4. falsification of invoices or other records
5. allowing customers to take products without taking title |
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Term
| The Securities Act of 1933 |
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Definition
| requires full disclosure of financial information through the filing of registration statements before securities can be sold in the financial markets |
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| securities exchange act of 1934 |
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Definition
| requires ongoing disclosures for registered companies as well as regulation of stock exchanges, brokers, and dealers |
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| What year did COSO release its internal controls report? |
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Definition
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Term
| What two accounting scandals prompted the sarbanes-oxley act of 2002? |
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Definition
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| What was the purpose of SOX? |
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Definition
| to improve financial reporting and reinforcing the importance of corporate ethics |
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Term
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Definition
| public companies and the auditors of public companies |
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| What board was established to carry out the provisions of SOX? |
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Definition
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Term
| how is data mining software being used? |
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Definition
| helps uncover suspicious patterns that might indicate fraud |
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