9/16 Chapter 3 Flashcards
materiality
what effects the judgement of a user of that application or financial statement
fraud two types
embezzlement/misappropriation
manipulation
override
when a supervisor forces an employee to cook the books
collusion
when two people work together to steal from the company
fraud triangle
top is the opportunity for fraud
bottom left: incentive and pressures
bottom right: rationalization
controls
we have to have these
skimming
taking money before it gets to the books
larseny
taking cash after it has entered the books
shipping fraud
shipping companies don’t give the deals they promise
kick back
when someone does something that doesn’t benefit the company but they will benefit from it.
computer control issues
making sure only certain people have authority
COSO
Committee of sponsoring organizations
Control Environment - soft control, who is governing the organization? what is managements feelings and objectives
Risk Assessment - what can go wrong
Control Activities - what have we put in place to have controls
Six Control Activities:
1. Segregation of Duties
2. Authorization
3. Documentary Controls - audit trail
4. Safeguarding of assets
5. Reconciliation, Review, and Analysis
6. IT controls
General Computer Controls (GCC)
Application Control
Information & Communication - established policies and procedures and letting your company know what they are
Monitoring - have someone who comes back around and verifies things
COSO committee made up of
AICPA - they made this Institution of internal auditors FEI - financial executive institutes CMA AAA(american accounting association)
corporate governance
the amount of control in a corporation
ethics
do what you feel to be right
