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BEC > COSO Framework > Flashcards

COSO Framework Flashcards

1
Q

COSO Internal Control

A

Internal Controls are Processes, designed, and implemented by an entity’s management, BOD, and other employees to provide reasonable assurance about the achievement of entity objectives.

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2
Q

T/F COSO Internal Controls are rule based?

A

F - principals, tailored to the particular company in a particular industry

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3
Q

Reporting Objectives

A

Timeliness, reliability, transparency of an entity’s external and internal financial and non-financial reporting

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4
Q

Operational Objectives

A

Effectiveness and efficiency of an entity’s operations and ensuring assets of the organization are properly safeguarded

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5
Q

Compliance Objectives

A

Reasonable assurance the entity will comply with applicable laws and regulations

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6
Q

Control Environment

A

Tone at the top; includes processes, structures and standards that provide the foundation for an entity to establish a system of internal control

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7
Q

What are principles related to Control Environment?

A

Competence
Accountability
Board Independence
Lines of Authority
Ethics

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8
Q

Competence

A

Organization demonstrates commitment to attract, develop, and retain competent individuals as well as prepare for turnover and succession planning

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9
Q

Accountability

A

Organizations need to hold employees accountable for their internal control responsibilities, need to measure performance, possible incentives and rewards as appropriate, disciplinary actions as necessary

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10
Q

Board Independence

A

Board oversees internal control from initial development of controls to performance oversight

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11
Q

Lines of Organizational Structure

A

Organizational structure is tailored to the entity and reporting relationships do no undermine the commitment to effective financial reporting and internal control

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12
Q

Ethics

A

Commitment to ethics from top down through behavior, code of conduct

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13
Q

Risk Assessment

A

Relates to objective setting, assessing risks, fraud, and change management

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14
Q

What are the principles of Risk Assessment?

A

Objective Setting
Assessment of Risk
Fraud
Change Management

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15
Q

Objective Setting

A

Understanding the organization’s mission, vision, and core values to ensure the objectives are aligned with the overall goals and direction of the organization

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16
Q

Assessment of Risk

A

Assessment of operational, reporting, and compliance risks and determining how to respond

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17
Q

Fraud Risk

A

Considers incentives and pressures to commit fraud and ability to rationalize it

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18
Q

Fraud triangle

A

Incentives & pressure, opportunity, ability to rationalize

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19
Q

Change Management

A

Assessing changes that could significantly impact the system of internal control such as changes in industry trends or key employees leaving the company

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20
Q

Control Activities

A

Methods used to implement the response to risk

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21
Q

What are the principles of control activities

A

Risk reduction
Technology controls
Policies

22
Q

Information and Communication

A

Enables internal control functions and emphasizes that a company must capture and exchange information needed to conduct, manage, and control operations; everyone also must understand their role

23
Q

Internal communication

A

communication within the entity to enable all personnel understand and execute their internal control responsibilities

24
Q

External communication

A

Board of directors have relevant information, IT security people provide information about networks, external auditors can provide information about accounting controls

25
Q

Monitoring

A

Process used to assess the quality of internal control performance over time through ongoing evaluations, separate evaluations, or a combination; essential for the effectiveness of internal control providing assurance that errors or deviations will be detected and corrected

26
Q

Ongoing evaluations

A

built into the business processes at different levels of the entity

27
Q

Separate evaluations

A

occur periodically, often by the internal audit department, vary in scope

28
Q

What does effective monitoring align with?

A

Risk profile

29
Q

What are the principles of monitoring

A

Ongoing/separate evaluations
Evaluate and communicate control deficiencies

30
Q

Evaluate and communicate control deficiencies

A

Evaluation and communication should happen quickly enough to parties responsible for taking corrective action

31
Q

Monitoring for change continuum

A

assess changes in internal control effectiveness

32
Q

What are the 4 steps for monitoring for change continuum

A

Establish a control baseline
Change identification
Control revalidation
Establish a new baseline

33
Q

Establish a control baseline

A

understanding the baseline condition before the change

34
Q

Change identification

A

Through risk assessment, finding what has changes and then respond to those changes by asking what controls we can put in place to minimze theft

35
Q

Control revalidation

A

monitor changes to make sure controls are effective

36
Q

Change management

A

Verify controls remain effectiveness by establishing a new baseline

37
Q

Enterprise Risk Management

A

Assists organizations in developing a comprehensive response to risk management; effectively deal with uncertainty, evaluate risk acceptance, and build value

38
Q

What are the components of ERM

A

Governance and culture
Strategy and objective setting
Performance
Review and revision
Information, communication, reporting

39
Q

What are the components of COSO

A

Control Enviornment
Risk Assessment
Information and Communication
Monitoring
Existing control activities

40
Q

What is the main objective of ERM?

A

Creating, preserving, and realizing value

41
Q

Governance and culture

A

Sets the organization’s tone, reinforcing the importance of and establishing oversight responsibilities for

42
Q

Principles of governance and culture

A

Board oversight
Establishing operating structues
Attract develop and retain capable individuals
Define desired culture
Demonstrate commitment to core values

43
Q

Principles of Strategy and objective setting

A

Evaluates alternative strategies
Formulates business objectives
Analyze business context
Define risk appetite

44
Q

Principles of Performance

A

Develops portfolio view
assesses severity of risk
prioritize risk
identifies risk events
implements risk response

45
Q

Principles of Review and revision

A

assess substantial change
pursue improvement
reviews risk and performance

46
Q

Principles of Information, communication, and reporting

A

leverage information and technology
communicate risk information
reports on risk culture and performance

47
Q

Strategy and objective setting

A

Evaluating alternative strategies and formulating business objectives based on vision of the organization and its mission

48
Q

Performance

A

identifies and select risk responses as result of prioritizing risk

49
Q

Review and revision

A

reviews performance and considers risk after the fact to determine whether the actions taken were effective in mitigating risk; re-visiting and improving efficiency

50
Q
A

BEC (9 decks)

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