Chapter 14: Internal Controls Flashcards
COSO
Committee of Sponsoring Organizations of the Treadway Commission
National organization formed in 1985 to study fraud in financial reporting
Internal control
Process in an organization of achieving efficiency and effectiveness of operations, reliability of financial reporting, and compliance with laws and regulations
5 Components of Effective Internal Controls
- Control environment - strong leadership
- Risk assessment
- Control activities - separation of duties, solid internal policies and procedures
- Information and communication of policies to employees and management
- Monitoring activities - testing internal control environment
Independent Sector
Nonprofit organization that provides leadership in the nonprofit sector. Is sponsors research on nonprofits, fights for public policies to support nonprofits, etc.
What threshold of expenditures are nonprofits required to be federally audited for?
$500,000
Sarbanes-Oxley Act of 2002
Reaction to accounting scandals of Enron, etc. Requires publicly traded corporations (not nonprofits) to adhere to new finances and audit procedures. For corporations, including nonprofits, prohibits retaliation against whistleblowers, and prohibits corporations from destroying/altering/concealing documents or from impeding investigations.