Chap 6 Internal Control

Question 0

ICFR

Answer 0

Internal Control of Financial Reporting

Question 1

Framework

Answer 1

The body of guiding principles that from a template against which organization can evaluate a multitude of business practices.

Question 2

COSO

Answer 2

Committee of Sponsoring Organization of the Treedway Commission, a voluntary private sector organization dedicated to improving the quality of financial reporting through business ethics, effective internal controls, and corporate governance

Question 3

Supplemental publications to COSO’s Internal Control - Integrated Framework

Answer 3

• internal Control Over Financial Reporting -Guidance for Smaller Public Companies
• Guidance in Monitoring Internal Control Systems
• internal Control Over External Financial Reporting: a Compendium of Appeoaches and Examplea

Question 4

The COSO, CoCo and Turnbull frameworks

Answer 4

Are used by an increasing number of organizations to evaluate the entire system of internal controls, not just internal controls over financial reporting

Question 5

Internal Control (COSO’s definition)

Answer 5

A process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the ache comment of objectives relating to operations, reporting and compliance

Question 6

The components of internal control

Answer 6

Control Environment
Risk Assessment
Control Activities
Information and Communication 
Monitoring Activities

Question 7

Critical Success Factors

Answer 7

Success that much be accomplished for objectives to be achieved

Question 8

Segregation of Duties

Answer 8

Diving control activities among different people to reduce the risk of error or inappropriate actions taken by any single individual

Question 9

Actions Speak Louder Than Words

Answer 9

In addition to hardcopy, electronic and oral communication formats, management’s actions powerfully communicate what is important to the organization

Question 10

Deficiency (COSO’s definition)

Answer 10

“A condition within an internal control system worthy of attention” that may represent a perceived potential, or a real short-coming, or opportunity to strengthen the internal control system to provide a greater likelihood that the entity’s objectives will be achieved

Question 11

Tone at the Top

Answer 11

The entity-wide attitude of integrity and control consciousness, as exhibited be the most senior executives of an organization

Question 12

Reasonable Assurance

Answer 12

A level of assurance that is supported by generally accepted auditing procedures and judgements

Question 13

Inherent Limitations if Internal Control

Answer 13

The confines that relate to the limits if the human judgement, resource constraints, and the need to consider the cost of controls in the relation to expected benefits, the reality that breakdowns can occur, and the possibility of collusion or management override

Question 14

Inherent Risk

Answer 14

The combination I’d internal and external risk factors in there pure uncontrollable state, or the gross risk that exists assuming that there are no internal controls in place

Question 15

Risk Appetite

Answer 15

The amount of risk, on a broad level, an organization is willing to accept in the pursuit of its business objectives.

Question 16

Risk Tolerance

Answer 16

The acceptable levels of risk size and variation relative to the achievement of objectives, which must align with the organization’s risk appetite

Question 17

Controllable Risk

Answer 17

The portion of inherent risk that management can reduce through day-to-day operations and management activities

Question 18

Residual Risk

Answer 18

The portion if the inherent risk that remains after management execute its risk responses (sometimes referred to as net risk)

Question 19

Entry-Level Control

Answer 19

A control that operates across an entire entity and as such is not bond by or associated with individual processes.

Question 20

Process-Level Control

Answer 20

An activity that operates within a specific process for the purpose of achieving process-level objectives

Question 21

Transactional-level Control

Answer 21

An activity that reduces risk relative to a group or variety of operations-level tasks or transactions within an organization

Question 22

Key Control

Answer 22

An activity designed to reduce risk associated with a critical business objective.

Question 23

Secondary Control

Answer 23

an activity designed to either reduce the risk associated with business objectives that are not critical to the organizations survival or success or serve as a backup to a key control

Question 24

Compensating Control

Answer 24

An activity that if key controls do not fully operate effectively, may help to reduce the related risk. A compensating control will not by itself reduce risk to an acceptable level

Question 25

PCAOB

Answer 25

The U.S. Company Accounting Oversight Board