Chapter 5 Principles of Internal Control Flashcards
What is the primary objectives of internal control?
- Reliability and integrity of financial and operational info
(Operational objectives) - Effectiveness and efficiency of operations
(Reporting objectives) - Compliance with policies,procedures, laws and rules and regulations
(Compliance objectives) - Safeguarding of assets
What is internal control?
Methods and procedures
Accepted by management
Help in achievement of management’s goals
Business properly conducted in orderly and efficient manner
Waarvoor staan COSO?
Committee Of Sponsoring Organisations
5 elements of the COSO framework :
Control environment
Risk assesment
Control activities
Information and communication
Monitoring
What is the management principles?
Planning
Organising
Directing
Controlling
Aspects of the control environment :
Philosphy and style of management
Organisational structure
Methods used for communication
HR development
HR development (6)
Appointment and evaluation of staff
Personnel scheduling
Rotation of duties ( within limits)
Career path and formalisation od personal practices
Maintain high morale– employee satisfaction
Classification of controls :
Preventative - most cost effective , prevent undesirable events BEFORE they happen
Detective - measure the effectiveness of preventative controls , identify events as they DO happen
Corrective – reverse events ex. Insurance
Types of internal controls
Seregation of duties
Authorisation of transactions and activities
Proper documents and records
Safeguarding of assets
Independent checks
What is the advantages of internal control?
Achievement of goals
Prevention of resourcelosses
Promotion of reliable financial reporting
Compliance with laws and regulations
Builds reputation
What is the disadvantages of internal control? (Limitations)
Internal control can not ensure
- –sucess of the org.
- –reliability of financial information and compliance with laws ONLY reasonable assurance
Inherent limitations of internal control systems
Controls in the IT environment ;
IT controls divided into :
–general controls ( IT environment as a whole) weak controls influence application controls negatively
–application controls ( spesific software programs and systems…..input- , processing- and output controls
