Term
| Objective in designing effective internal controls |
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Definition
1) Reliability of financial reporting
2) Efficiency and effectiveness of operations
3) Compliance with laws and regulations |
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Term
| Management's responsibilities for internal controls |
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Definition
-for establishing and maintaining the entity's internal controls.
-to publicly report on the operating effectiveness of those controls
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Term
| Auditor's responsibilty for internal controls |
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Definition
-understanding and testing internal control over financial reporting.
-to issue an audit report on the operating effectiveness of those controls for public companies |
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Term
| SOX 404 Internal Control Report |
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Definition
-A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting
-An assessment of the effectiveness of the internal control structure and procedures for financial reporting as of the end of the company's fiscal year. |
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Term
| Five COSO internal control components |
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Definition
1) Control Environment
2) Risk Assessment
3) Control Activities
4) Information and Communication
5) Monitoring |
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Term
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Definition
consists of the actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about internal control and its importance to the entity
(Intergrity and ethical values, Commitment to competence, board of director or audit committee participation, management's philosophy and operating style, organizational structure, and HR policies and practices) |
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Term
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Definition
| is management's identification and analysis of risks relevant to the preparation of financial statements in conformity with GAAP |
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Term
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Definition
| are the policies and procedures, in addition to those included in the other four control components, that help ensure that neccessary actions are taken to address risks to the achievement of the entity's objectives |
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Term
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Definition
1) Adequate separation of duties
2) Proper authorization of transactions and activities
3) Adequate documents and records
4) Physical control over assets and records
5) Independent checks on performance |
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Term
| Four Separation of Duties Guidelines |
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Definition
1) Separation of the Custody of Assets from Accounting
2) Separation of the authorization of transactions from the custody of related assets.
3) Separation of Operational Responsibility from Record-Keeping Responsibility
4) Separation of IT Duties from User Departments |
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Term
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Definition
management establishes policies and subordinates are instructed to implement these general authorizations by approving all transactions within the limits set by the policy.
(credit limits, fixed price list, fixed reorder points) |
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Term
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Definition
| applies to individual transactions where management prefers t oauthorize each transaction. |
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Term
| Authorization vs Approval |
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Definition
Authorization is a policy decision for either a general class of transactions or specific transactions
Approval is the implementation of management's general authorization decisions |
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Term
| Adequate Documents and Records |
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Definition
are the records upon which transactions are entered and summarized.
(prenumbered consecutively,prepared at time taken place, designed for multiple use, constructed in a manner that encourages correct preparation) |
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