Chapter 4 Flashcards
Internal Controls
1) safeguard the company assets
2) improve accuracy and reliability of accounting info
Sarbanes-Oxley Act
Sec. 404 - requires management and auditors to document and assess the effectiveness of a company’s internal controls
Major Provisions of SOX Act
oversight board corporate executive accountability nonaudit services retention of work papers auditor rotation conflicts of interest hiring of auditor internal control
Components of Internal Control
monitoring
control activities
risk assessment
control environment
Monitoring
formal procedures for reporting control deficiencies
Control Activities
ensure that management’s directives are carried out (authorizations, reconciliations, and separation of duties)
Risk Assessment
identifies and analyzes internal and external risk factors that could prevent obj from being carried out
Control Environment
sets ethical tone of company
Preventive Controls
separation of duties physical controls proper authorization ee management e-commerce controls
Detective Controls
reconciliations
performance reviews
audits
Cash Equivalents
st investments that have a maturity date no longer than 3 mos.
Bank Reconciliation
matches the amt (of cash) in bank account with amt (of cash) in company records
Petty Cash Fund
cash on hand to pay for minor expenses
