Chapter 4Internal Control

Bus 319Accounting Information Systems

Megan

What is the Foreign Corrupt Practice Act of 1977

Foreign Corrupt Practice Act of 1977

A process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, … , to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

Foreign Corrupt Practice Act of 1977

1. Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the registrant; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Jen C

What is the Sarbanes-Oxley Act of 2002

What is the Sarbanes-Oxley Act of 2002

• Management must:– assess and test the effectiveness of the internal controls– report their findings on the effectiveness of the internal controls

• The independent auditor must:– assess and test the effectiveness of the internal controls– report their findings on the effectiveness of the internal controls

Matt S

What are the four primary components of Brown’s taxonomy of risk

Brown’s Taxonomy of Risk

• Financial Risk

• Operational Risk

• Strategic Risk

• Hazard Risk

Preston

Can you name the three elements ofFinancial Risk

Brown’s Taxonomy of Risk – Financial Risk

• Financial Risk

–Market risk–Credit risk– Liquidity risk

Vincent

Can you name the two elements ofOperational Risk

Brown’s Taxonomy of Risk – Operational Risk

• Operational Risk

– Systems risk–Human error

Yannine

Can you name the two elements ofStrategic Risk

Brown’s Taxonomy of Risk – Strategic Risk

• Strategic Risk

– Legal and regulatory risk–Business strategy risk

Erika

Can you name the element ofHazard Risk

Brown’s Taxonomy of Risk – Hazard Risk

• Hazard Risk

–Directors’ and Officers’ liability

Allie

Can you name the five components ofthe COSO internal control framework

COSO Internal Control Framework

• Control environment• Risk Assessment• Control Activities• Information & communications• Monitoring

Wesley

Can you name the fiveControl Activities

Control Activities

• Adequate documentation• Background checks• Backup computer files• Backup power supplies• Bank reconciliation• Batch control totals• Data encryption• Document matching• Edit checks• Firewalls

• Insurance and bonding• Internal audit• Limit checks• Lockbox systems• Physical security• Preformatted data screens

• Prenumbered documents• restrictive endorsement• Daily deposit of checks• Segregation of duties• Training

Victoria

Can you name the eight components ofEnterprise Risk Management framework

Enterprise Risk Management Framework

• Internal Control environment• Objective Setting• Event Identification• Risk Assessment• Risk Response• Control Activities• Information & communications• Monitoring