1.3 Internal controls

Question 1

Federal Managers Financial Integrity Act of 1982

Answer 1

Internal Controls mandated for each Agency and required annual reporting. 1. Obligations and costs are in compliance with applicable law 2. Funds property and other assets are safeguared against loss, unauthorized use 3. Revenues and expeditures applicable to agencies operations are properly recorded and accounted for.

Question 2

Steps of Eterprise Risk Management

Answer 2

Establishing, assessing, correcting and reporting on internal controls. Involves a “portfolio view” meaning all areas HR, technolgoy, finance, reputation risk, etc.

Question 3

DOD subdocument for implementing internal controls, and what gov docs did it referene

Answer 3

Federal Managers Financial Intergrity Act of 1982 came out and OMB published OMB Circular A-123 describing how to implement and DOD then created DOD 5010.40 to adress how to implement FIMFIA and OMB A-123

Question 4

Annual assuarnce statements

Answer 4

Required by FMFIA; Annual Statement required by every federal agency on whether there is reasonable assurance that the agencies internal contols are achiving their intended objectives 2. Any material weaknesses in the agency’s controls

Question 5

Internal Controls required over which processes

Answer 5

1. Operations 2. Financial Reporting (accurate/reliable) 3. Financial Systems (compliant with law)

Question 6

Primary purpose of a risk profile

Answer 6

provide a thoughtful analysis of the risks and Agency faces towards achieving its strategic objectivess and arising from its activities and operations

Question 7

Enterprise Risk Management and development of “Risk Profiles” mandated by

Answer 7

OMB Circular A-123

Question 8

FISCAM includes which controls

Answer 8

1. General Controls 2. Business process application controls

Question 9

Three Broad categories of internal controls which should provide reasonable assurance

Answer 9

Operations -efficiency of, reporting- reliable reporting, compliance - comply with law/regs

Question 10

What does reasonable assurance mean for internal controls

Answer 10

Doesn’t mean you’ll never find waste or fraud but making best and logical effort

Question 11

Internal control category of Financial Systems has two sub categories that are set by what manual

Answer 11

General (Security, configuration and access to entities information systems) and Business Process Application Controls (Individual Computerized applications generate complete, accurate, valid, confidential transactions); Federal Information System Controls Audit Manual (FISCAM)

Question 12

Components in Green Book

Answer 12

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

Question 13

Control Environment in Internal Controls

Answer 13

The foundation of IC system. Discipline and structure to help an entity achieve objectives. Tone at the top, decipline, commitment to integrity, etc.

Question 14

Risk Assessment in Internal Controls

Answer 14

Assesses the risks facing the entity as it seeks to achieve its objective. Basis for developing appropriate risk responses. Defined risk tolerances for reasonable assurance threshold.

Question 15

Control Activites in Internal Controls

Answer 15

The actions management establishes throguh policies and procedures to achive objectives and respond to risks. Intstalling safes, segregation of duties, changing passwords, too much access, spot checks, etc…

Question 16

Information and Communication in Internal Controls

Answer 16

The quality information management and personnel communicate and use to support the IC system. Timely accurate and validatable information. Reporitng, mid year reviews, etc.

Question 17

Monitoring in internal controls

Answer 17

Activites management establishes and operates to assess the quality of performance over time and proptly resolve findings. Always looking for ways to improve and test controls. Testing, auditing, continuous review

Question 18

OMB A-123 requires the following in annual statement of assurance

Answer 18

1. Conduct Assessment of Internal Control 2. Identify Control Deficiencies 3. Conclude on Internal Control Principle Evaluation 4. Conclude on internal control component evaluation 5. Conclude on overall assessment of a system of internal controls

Question 19

Internal Control Significant Deficiency

Answer 19

deficienct that is less severe than a material weakness. Reported internally in the organization, not external. Definiciency can be correted internally

Question 20

Material Weakness

Answer 20

Significant deficiency and Agency head reports outside the agency. Non-achievement of a relevent internal control priciple. Weakness and summary of corrective actions reported to OMB and congress through AFR, PAR or other reports. Periodic progress of corrective action must also be reported

Question 21

Corrective Action Plan required for and included in

Answer 21

Material weaknesses; reported in Agency Financial Report (AFR), Performance and Acountablity Report (PAR) or other mgmt report

Question 22

Performance and Accountability Report (PAR)

Answer 22

Wrapped up all inclusive report that is submitted 45 days after FY.

Question 23

Definicieny is deemed corrected when…

Answer 23

1.sufficient corrective action taken 2. Achieved desired results (corrective action must be VALIDATED)

Question 24

Responsibility for IC for DOD and mandated by what

Answer 24

DOD 5010.40; Major responsibility USD (Comptroller), All other responsibilities to each DOD and OSC Component head

Question 25

4 levels of DOD material weakness

Answer 25

1. DOD Level - Big deal, exists in majority of DOD components 2. Component Level - Big deal throughout DOD component 3. Major Command or Field Activity Level - Throughout Major command or one or more installations 4. Installation or Activity Level - Requires attendtion of head of installation

Question 26

DOD 5010.4 required USD Comptroller to

Answer 26

Establish Senior Management Council to advise on internal controls and Co-chair a Financial Improvement and Audit Remediation (FIAR) Governanace Board with the DOD Deputy Chief Management Officer (DCMO)

Question 27

Most due dates regarding internal controls

Answer 27

November 15th, 45 days after end of FY

Question 28

DOD Statement of assurance provides three levels of statement of assurance

Answer 28

1. Unmodified Statement of Assurance - No material weaknesses 2. Modified - One or more material weaknesses 3. Statement of no assurance

Question 29

Assessable Unit

Answer 29

Any unit that has its own internal controls that need to be addressed

Question 30

Control Objective

Answer 30

Specific goal or level of control desired for an assessable unit (Unit meeting threshold to have own Internal Controls)

Question 31

Annaul Statement of Assuranc required parts

Answer 31

1. Statement of Reasonable assurance 2. Assurace regarding ICOFR (Financial Reporting) 3. Assurance regarding ICOFS (Financial Statements) 4. Unmodified/Modified/No assurance

Question 32

Internal control definition

Answer 32

Internal Control comprises the plans, methods, policies and procedures used to fullfill the mission, strategic plan, goals and objectives of the entity. First line of defence safeguarding assets.