Chapter 10 - Control and Accounting Information Systems Flashcards
What are internal controls?
The processes and procedures implemented to provide reasonable assurance that control objectives are met.
What are preventive controls?
Controls that deter problems before they arise, such as hiring qualified accounting personnel; appropriately segregating employee duties; and effectively controlling physical access to assets, facilities, and information.
What are detective controls?
Controls designed to discover control problems that were not prevented, such as duplicate checking of calculations and preparing bank reconciliations and monthly trial balances.
What are corrective controls?
Controls that identify and correct problems as well as correct and recover from the resulting errors, such as maintaining backup copies of files, correcting data entry errors, and resubmitting transactions for subsequent processings.
What are general controls?
Controls designed to make sure an organization’s information system and control environment is stable and well managed, such as security; IT infrastructure; and software acquisition, development, and maintenance controls.
What are application controls?
Controls that prevent, detect, and correct transaction errors and fraud in application programs. They are concerned with the accuracy, completeness, validity, and authorization of the data captured, entered into the system, processed, stored, transmitted to other systems, and reported.
What is a belief system?
Systems that describe how a company creates value, helps employees understand management’s vision, communicates company core values, and inspires employees to live by those values.
What is a boundary system?
System that helps employees act ethically by setting boundaries on employee behavior. Instead of telling employees what to do, they are encouraged to creatively solve problems and meet customer needs while meeting minimum performance standard, shunning off-limit activities, and avoiding actions that might damage their reputation.
What is a diagnostic control system?
System that measures, monitors, and compares actual company progress to budgets and performance goals; feedback helps management adjust and fine-tune inputs and processes so future outputs more closely match goals.
What is an interactive control system?
System that helps managers to focus subordinates’ attention on key strategic issues and to be more involved in their decisions; system data are interpreted and discussed in face-to-face meetings of superiors, subordinates, and peers.
What is the Foreign Corrupt Practices Act (FCPA)?
Legislation passed to prevent companies from bribing foreign officials to obtain business; also requires all publicly owned corporations maintain a system of internal accounting controls.
What is the Sarbanes-Oxley Act?
Legislation intended to prevent financial statement fraud, make financial reports more transparent, provide protection to investors, strengthen internal controls at public companies, and punish executives who perpetrate fraud.
What is the PCAOB?
A board created by SOX that regulates the auditing profession.
What is COBIT?
A security and control framework that allows management to benchmark the security and control practices of IT management, users of IT services to be assured that adequate security and control exist, and auditors to substantiate their internal control opinions and advice on IT security and control matters.
What is COSO?
A private-sector group consisting of the AICPA, the Institute of Internal Auditors, the Institute of Management Accountants, and the Financial Executives Institute.
What is the Internal Controls - Integrated Framework?
A COSO framework that defines internal controls and provides guidance for evaluation and enhancing internal control systems; widely accepted authority on internal controls incorporated into policies, rules, and regulations used to control business activities.
What are the five components of the integrated framework?
Control environment, risk assessment, control activities, information and communication, and monitoring.
