Chapter 8 Flashcards
what is an internal control
something put in place to ensure you get the desired outcome/ meet your objectives
inherant limitations of internal control
costs of control outweighing benefits
poor judgement
fraud
controls not being updated
unforeseen circumstances
5 categories of COSO cube
control environment
risk assessment
control activities
information and communication
monitoring activities
what is the control environement
culture, rules and structure of organisation
what is the risk assessment
assessing likelihood and impact of risk
what are the control activities
actions
what is a prevent control
to prevent errors from happening
what is a detect control
to detect errors once occurred
what is a correct control
designed to minimise error
what is a direct control
direct to a desired outcome such as evacuation policy and training
what is a discretionary control
needs human decision
what is a non discretionary control
based on rules / automatic
acronym for control procedures
APIPS
what does APIPS stand for
Authorisation physical controls information processing performance reviews segregation of duties
acronym for good information
ACCURATE
what does ACCURATE stand for
Accurate Complete Cost-beneficial User-targeted Relevant Authoritative Timely Easy to use
what is an annual review of controls
FRC states the board should conduct an annual review of internal controls, assessing any changes, the quality of the controls and any deficiencies
advantages of audit committees
improves quality of financial reporting
creates climate of discipline and control
strengthens position of external auditors
helps FD- NED’s can advise them
disadvantages of audit committees
not always clear what they’re doing as findings are not made public
the effectiveness can be compromised if they act as a barrier between external audit and the board
6 responsibilities of audit committee
monitoring and reviewing
overseeing
policy setting
response to auditors
auditors request
whistleblowers
