BEC Chapter 1 Flashcards
What are the 3 objectives WITHIN the COSO framework?
- Operations
- Reporting
- Compliance
What are the 5 COMPONENTS of Internal Control?
“CRIME”
- Control Environment
- Risk Assessment
- Information & Communication Systems
- Monitoring
- Existing Control Environment
5 Principles within the Control Environment (“ACBOC”):
- Accountability
- Commitment to Competence
- Board independence and oversight
- Organizational structure
- Commitment to competence
4 Principles within the Risk Assessment (“SICI”):
- Specify objectives
- Identify and analyze risks
- Consider the potential for fraud
- Identify and assess changes
3 Principles within Information & Communication (“CIO”):
- Communicate with external parties
- Internally communicate information
- Obtain and use information
2 Principles within Monitoring Activities (“OC”):
- Ongoing and/or separate evaluations
2. Communication of deficiencies
3 Principles within Existing Control Activities (“SSD”):
- Select and develop control activities
- Select and develop technology protocols
- Deploy through policies and procedures
The Committee on Sponsoring Organizations (“COSO”) prepared the Internal Control Integrated Framework (in 1992):
To help businesses assess internal control.
Components of Enterprise Risk Management (“ERM”). Hint: IS EAR AIM
- Internal environment
- Setting objectives
- Event identification
- Assessment of Risk
- Risk Response
- Activities (control)
- Information and communication
- Monitoring
ERM’s enterprise objectives (4 in total):
- Strategic (different from COSO objectives)
- Reporting
- Compliance
- Operations
3 objectives within COSO framework (3 in total):
- Operations
- Compliance
- Reporting
The criteria for evaluating the effectiveness of ERM are:
The COMPONENTS of the ERM framework (NOT key elements)
External Benchmarks - Total Factor Productivity (TPR) formula
quantity of outputs produced/costs of ALL inputs used
External Benchmarks - Partial Productivity Ratio (PPR) formula
quantity of outputs produced/quantity of input used
Product Costs
Product costs include direct materials, direct labor, and overhead - CAPITALIZED ON B/S
