COSO 3

Question 1

Operations Objectives

There are three focuses now for the objectives, used to be more narrow and related only to reliable financial statements

Answer 1

Effectiveness and efficiency of entities operations
and
Financial Performance
and
Safeguarding Assets

Question 2

Reporting Objectives

Answer 2

Related to internal and external
Financial and non-financial reporting to stakeholders
Reliable
Timely
Transparent
Used to be just related to financial reporting

Question 3

Compliance Objectives

Answer 3

Laws and regulations

Now more broad and recognizes complexity of laws and accounting standards

Question 4

Why are they Using COSO

Answer 4

Because the SEC and SOX require them to report on internal control and they need a framework

Question 5

Internal Control over Financial Reporting Definition by SEC not in COSO

Answer 5

Process designed by or under the supervision of the principal executive and principal financial officers and effected By the issuer’s BOD management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and preparation of FS for external purposes in accordance with GAAP

Question 6

What changes was the Updated COSO standards trying to address?

Answer 6

Globalization of markets and operations and risk factors resulting from
Governance Concepts - more complex global organizations and regulations
Different Business Models - Organizations becoming more decentralize and include more third-party service providers and partnering arrangements

Laws and Regulations - more complex, greater stakeholder protection req’d
Competence and Accountability of Personnel - need more skilled people
Information Systems - Increased relevance of IT
FRAUD RISK - enhanced consideration of potential fraud

Question 7

Control Environment

What are the 5 Principles

Answer 7

1. Integrity and Ethics
2. BOD independent from Mgt.
3. Mgt estblishes, with bod oversight, lines of reporting authority so objectives can be carried out
4. Commitment to Competency
5. People are held Accountable

Question 8

Risk Assessment (general Notes on)

Answer 8

Dynamic Process and considers external environment
Risk Assessment Process Includes:
Identification, Analysis, Response
Risk Tolerances Considered

Discussion of Risk Severity includes
  Velocity (what does this mean?)
  Persistence
  Impact
  Likelihood

Now must address the risk of fraud.

Question 9

What type of costing involves the Equivalent Units and what type doesn’t.

Answer 9

Process costing involves the EU calculations. Job-Order Costing Does not.

Absorption Costing is called - one is direct and the other is ???
Need to remember this

Question 10

What type of costing uses cost pools?

Answer 10

Activity based costing.

Question 11

Control Activities. Defined What do they do.

Answer 11

Actions established by the policies and procedures to help ensure that management directives to mitigate the risks to achievement of objects are carried out.

Question 12

Control Activites Defined - They may be _________ or ____________ in nature.

Answer 12

They may be preventative or detective in nature.

Question 13

Control Activities - Encompass what types of activities?

Answer 13

A range of manual and automated activities such as authorizations and approvals, verifications, reconciliations, business performance reviews.

Question 14

Under which component does this belong: Business performance review.

Answer 14

Control Activity - 
Performance Review
I - can never remember this
Physical Controls
Segregation of Duties

Question 15

Control Activities - What’s normally built in?

Answer 15

Segregation of duties is typically built into the selection and development of control activities.

Question 16

What does management due when segregation isn’t practical?

Answer 16

Comes up with alternative Control Activities.

Question 17

What changed in the 2013 COSO Framework as far as IT Controls.

Answer 17

Discussion on general IT Controls

Expanded discussion between automated controls and general IT controls and how they link to business processes.

Question 18

What was the problem with the previous framework, what did companies focus on.

Answer 18

Control activities and not the other components. New COSO stress that all components should work in an integrated manner.

Question 19

What are the three of the 17 principles for Control Activities.

Answer 19

Organization selects and develop control activities that contribute to the mitigation of risks to the achievement of objectives at acceptable levels.

Organization selects and develops general control activities over technology to support the achievement of objectives.

Deploys control activities through policies that establish what is expected and in procedures that put the policies into action.

Question 20

What are the Objectives in COSO

Answer 20

Those are the three things across the top
Operations Objectives
Reporting Objectives
Compliance Objectives