Assessing Risk & Dev Response Flashcards
Presentation and Disclosure
whether financial statement components are properly classified, described, and disclosed
Occurence
Transactions and events that have been recorded or disclosed have ocurred
Completeness
All assets, liabilities, and equity interests that should have been recorded, and all related disclosures that should have been included in the financial statements have been included.
Accuracy
Amounts and other data relating to recorded transactions and events have been recorded appropriately
Cutoff
Transactions and events have been recorded in the correct accounting period
Classification
Transactions and events have been recorded in the proper accounts
Valuation and allocation
Assets, liabilities, and equity interests have been included in the financial statements at appropriate amounts
Inherent risk
the susceptibility of a relevant assertion to a misstatement that could be material, assuming that there are no related controls
Control risk
The risk that the internal control system will not detect a material misstatement
Price elasticity
greater than 1 indicates that changes in quantity demanded are more responsive than the change in price
Structural unemployment
Unemployment due to workers not having the skills demanded by employers, and workers who cannot easily move to the location where jobs are available
Walkthru procedures
Inquiry, observation, inspection of relevant documentation, and reperformance of controls
COSO
Control Environment
Control Activities
Risk Assessment
Information and communication
Monitoring
Trace
Completeness
Shipping records to sales invoices
Vouch
Existence
What is the greatest risk regarding the use of EDI?
Electronic Data Interchange
Improper distribution of EDI transactions-make sure they are processed by the proper entity, using the proper accounts
Rights and Obligations
All recorded assets are owned by the entity and that all liabilities are obligations of the entity at the given date
Existence
Assets and liabilities are real and exist at a specific date
Internal Control
a process effected by an entity’s BOD, mgmt, & other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
1. Effectiveness and efficiency of operations
2. Reliability of financial reporting
3. Compliance with applicable laws and regulations
Control Environment
Demonstrates commitment to integrity and ethical values.
Exercises oversight responsibility.
Establishes structure, authority and responsibility.
Demonstrates commitment to competence.
Enforces accountability.
Risk Assessment
Specifies suitable objectives.
Identifies and analyses risk.
Assesses fraud risk.
Identifies and analyzes significant change.
Control Activities
Selects and develops control activities that contribute to the mitigation of risks.
Selects and develops general controls over technology.
Deploys through policies that establish what is expected and procedures that put policies into action.
Information and Communication
Uses relevant information.
Communicates internally.
Communicates externally.
Monitoring Activities
Conducts ongoing evaluations.
Evaluates and communicates deficiencies in a timely manner to those parties responsible for taking corrective action.
Transaction assertions
Occurrence, Completeness, Accuracy, Cutoff, Classification.
Account Balance assertions
Existence, Rights and Obligations, Completeness, Valuation and Allocation
Presentation and Disclosure Assertions
Occurrence and Rights and Obligations
Completeness
Classification and Understandability
Accuracy and valuation
