6. Controls: Applications (5% 6 MCQs) Flashcards
Section J – Proficient
Application of IC Framework (COSO etc.)
Types of Flowcharts
Flowcharts
- Horizontal: Shows areas of responsibility.
- Vertical: Details program actions.
- Data Flow Diagram: Illustrates data movement.
- Process Mapping: Represents client processes.
Section J – Proficient
Application of IC Framework (COSO etc.)
Accounting Cycle
Accounting Cycle & Associated Controls
Accounting Cycles:
1. Sales to Debt: Sales to accounts receivable.
2. Collection to Cash: Receipts and recording of cash.
3. Purchases to Credit: Purchases and accounts payable.
4. Payment of Cash: Cash disbursements.
5. Payment of Employees: Payroll processing.
Section J – Proficient
Application of IC Framework (COSO etc.)
Associated Controls
Accounting Cycle & Associated Controls
- Internal Control: Systems to ensure accurate reporting and compliance.
- Segregation of Duties/Controls: Dividing responsibilities to reduce fraud and errors.
- Organizational Hierarchy: Defines roles and reporting structures.
Section K - Proficient
Effectiveness and Efficiency of ICs
Role & Responsibilities
Management Controls
- Management: Drives ethics and control.
- Board: Ensures integrity and oversight
- Internal Audit: Assesses systems.
- Other Personnel: Manages and reports on controls.
Section K - Proficient
Effectiveness and Efficiency of ICs
Organization
Management Controls
- Control: Use a clear structure.
- Roles: Define and divide authority.
- Follow-Up: Monitor and empower.
- Reporting: Employees report to supervisors.
- Structure: Keep it simple with charts.
Section K - Proficient
Effectiveness and Efficiency of ICs
Policies
Management Controls
- Policies: Guide actions.
- Documentation: Clearly written in a handbook.
- Communication: Distribute to all.
- Compliance: Follow local laws.
- Review: Update regularly.
Section K - Proficient
Effectiveness and Efficiency of ICs
Procedures
Management Controls
- Conformity: Align with policy.
- Controls: Include review and approval steps.
- Detail: Minimize reliance on human judgment.
- Clarity: Avoid overlap, conflict, or duplication.
- Review: Update regularly.
Section K - Proficient
Effectiveness and Efficiency of ICs
Personnel
Management Controls
- Qualifications: Ensure proper training and supervision.
- Training: Provide role-specific guidance.
- Performance: Regularly review employees
Section K - Proficient
Effectiveness and Efficiency of ICs
Accounting
Management Controls
- Reasoning: Use accounting for decision-making.
- Responsibility: Align with lines of responsibility.
- Costs: Identify controllable costs.
Section K - Proficient
Effectiveness and Efficiency of ICs
Budgeting
Management Controls
- Budget: Numeric representation of expected results.
- Ownership: Include budget owners in the process.
- Variance: Investigate discrepancies.
- Alignment: Match subsidiary and parent budgets.
Section K - Proficient
Effectiveness and Efficiency of ICs
Reporting
Management Controls
- Quality: Timely, accurate, and meaningful.
- Responsibility: Align with roles.
- Analysis: Cost-benefit analysis.
- Comparison: Show performance vs. budget.
- Disclosure: Highlight significant matters.
- Input: Gather feedback.
Section K - Proficient
Effectiveness and Efficiency of ICs
Example of Management Controls
Management Controls
- Occurrence: Transactions actually happened.
- Existence: Assets or liabilities are real.
- Completeness: All transactions and accounts are included.
Section K - Proficient
Effectiveness and Efficiency of ICs
Example of Management Controls
Management Controls
- Production: Quality control and process checks.
- Debt & Equity Instrument: Compliance with financial regulations.
- Cash: Reconciliation and secure handling.
- Inventory: Accurate recording and management.
- Insurance: Adequate coverage and claims processing.
- Sales Invoice: Proper documentation and authorization.
- Compensation Program: Fairness and alignment with company policy.
