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ACCT 5410 > Exam 1 Study Guide > Flashcards

Exam 1 Study Guide Flashcards

1
Q

COSO

A 
Top:
Operations
Financial Reporting
Compliance
Side:
Monitoring
Information and Communication
Control Activities
Risk Assessment
Control Environment
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2
Q

Monitoring

A

internal auditors

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3
Q

information & Communication

A

ERP system, policies and procedures that tell employees how to act

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4
Q

control activities

A

putting in place activities that prevent fraud

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5
Q

risk assessment

A

Entity Level Objectives - organizational view
Activity Level Objectives - activity view
Risks- make assertions, likelihood, impact
Controls - activities that prevent fraud

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6
Q

system

A

a network of parts that work together to make something

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7
Q

information system

A

converts data into information

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8
Q

batch processing

A

.requires that all similar transactions are grouped together for a specified time, and then this group of transactions is processed as a batch

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9
Q

Real Time/OL

A

the transaction is processed immediately

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10
Q

data levels

A

bit, byte, field, file/tables, relational

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11
Q

management information system

A

provides info that tells how the managers are doing

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12
Q

accounting information system

A

comprises the processes, procedures, and systems that capture accounting data from business processes; record the accounting data in the appropriate records; process the detailed accounting data by classifying, summarizing, and consolidating; and report the summarized accounting data to internal and external users

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13
Q

COSO

A

Committee of Sponsoring Organizations

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14
Q

COBIT

A

.Control Objectives for Information and related Technology

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15
Q

ERM

A

Enterprise risk management, includes methods to manage risk

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16
Q

AIS Flow

A 
Source Documents
Journals: special, general
Ledgers: sub, GL
Closing
Reporting
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17
Q

Audit Trail

A

source document, involves numbering of documents and authorization

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18
Q

Control Environment

A 
tone of the organization, code of ethics
elements:
integrity and ethical values
Corp governance
Management Philosophy
Org Structure
Assignment of Authority
HR Policy and Practices
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19
Q

corporate governance

A

an elaborate system of checks and balances whereby a company’s leadership is held accountable for building shareholder value and creating confidence in the financial reporting process

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20
Q

Audit Commitee

A

structures: component of the board that is independent of the company, not paid by the organization
roles: hires external/internal auditors and oversees audit activity

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21
Q

Code of Ethics

A

SOX requires that all public companies have a code of ethics stated

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22
Q

Whistleblowing

A

Dodd Frank,

SOX 806: made a way for whistleblowers to tell on their companies

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23
Q

Risk Prevention what can we do

A

Have Stewardship(safeguarding of assets)
Provide fair and transparent and full reporting and disclosure
Design and implement internal controls
Enforce a code of Ethics

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24
Q

Types of fraud

A

misstatement

misappropriation

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25
Q

misstatement

A

manipulation of records

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26
Q

collusion

A

two people working together to commit fraud

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27
Q

misappropriation

A

taking assets

28
Q

fraud triangle

A

Incentive Opportunity and rationalization

29
Q

categories of fraud

A

management - override
employee - taking assets
customer - returning stolen goods
vendor - shipping, getting paid more than earned

30
Q

Examples of fraudulent financial reporting

A 
smooth earnings - saving earnings for next quarter
revenues - making it up
omitted disclosures/exp
Window dressing
Pad assets
Off balance sheet
31
Q

examples of why people commit fraud

A 
company man
promotion
bonus
keep bank off back
meet analyst
32
Q

types of employee fraud

A

take inventory take cash(skimming - before being entered, larceny - after entered), AP manipulation, AR manipulation, payroll fraud, expense account/purchase card

33
Q

customer fraud

A

credit cards, bad checks, refunds

34
Q

vendor fraud

A

duplicate invoices, collusion/bribes, push unwanted inventory, bill for goods/services not delivered

35
Q

Internal Computer fraud

A

improper access, change account info, change financial info

36
Q

External Computer Fraud

A

hacking, spoofing/phishing

37
Q

Code of Ethics

A 
required by SOX 2002, 
obey laws and regs
honest, fair trustworthy conduct
avoid conflicts of interest
safe work environment
protect external environment
books and records
signed statement
38
Q

internal control objectives

A

safeguard assets
accurate and fair accounting
operational efficiency
comply with laws/ regs

39
Q

types of controls

A

preventative
detective
corrective

40
Q

COSO framework

A 
Monitoring 
Info and Comm (AIS)
Control Activities 
Risk Assessment
Control Environment
41
Q

risk can we get rid of it?

A

we can’t reduce it to zero, but we can mitigate it

42
Q

risk assessment

A

entity-wide objectives - organization objectives
Activity wide objectives - department objectives
Risks - what is the likelihood and impact
Managing Change - keeping up with changes

43
Q

process

A 
procedures that originate, transfer or change accounting data
ex:
take an order
calculate payroll
apply standard costs
prepare financial statements
44
Q

controls

A

procedures designed to prevent or detect errors resulting from the processing of accounting information.

45
Q

documentation of processes

A

internal control

46
Q

data flow diagrams

A

use symbols to represent processes, etc, represents the logical elements of a system, not the physical system, the entity is a box the process is a N over a process description

47
Q

document flowcharts

A

illustrate relationship among processes and the documents that flow between them, contains more detail than data flow diagrams, clearly depicts the separation of functions in a system

48
Q

systems flowcharts

A

represent relationship between key elements input sources, programs, and output products of a computer system, have to know
hard copy symbol: rectangle with piece ripped off the bottom
computer process: complete rectangle
terminal input/output device: rectangle with the top cut off diagonally
direct access storage device - cylinder

49
Q

assertions

A

revenue - existence
AP - Completeness
Inventory - existence
Inventory - valuation

50
Q

How many members of a board must not be and cannot have been CPA’s

A

3

51
Q

How many audits must a firm conduct to require annual quality reviews by the PCAOB

A

100

52
Q

To whom can document and info related to PCAOB investigations and proceedings be made available?

A

SEC, US Attorney General, and federal agencies

53
Q

Penalties for certifying a misleading or fraudulent financial report?

A

20 yrs of prison 5M

54
Q

If a foreign accounting firm only audits part of a US company and the primary auditor relies on their work, is the foreign firm subject to registrations with the board?

A

Yes

55
Q

By whom are the boards findings and sanctions subject to review?

A

the SEC and any advisory groups convened in connection with standard setting

56
Q

What are the 5 requirements a standard setting body must meet in order for the SEC to recognize its standards as “generally accepted”?

A

(1) be a private entity;
(2) be governed by a board of trustees (or equivalent body), the majority of whom are not or have not been associated persons with a public accounting firm for the past 2 years;
(3) be funded in a manner similar to the Board;
(4) have adopted procedures to ensure prompt consideration of changes to accounting principles by a majority vote;
(5) consider, when adopting standards, the need to keep them current and the extent to which international convergence of standards is necessary or appropriate.

57
Q 
What type of companies may make loans to its directors and executive officers?
Sec 402(a)
A

Consumer credit companies may make home improvement and consumer credit loans and issue credit cards to its directors and executive officers if it is done in the ordinary course of business on the same terms and conditions made to the general public.

58
Q

How long do a director, officer, and 10% owner have to report transactions involving management and principal stockholders?

A

by the end of the second business day on which the transaction occured

59
Q

When may the pre-approval requirement be waived for non-audit services?
Sec 201

A

The pre-approval requirement is waived with respect to the provision of non-audit services for an issuer if the aggregate amount of all such non-audit services provided to the issuer constitutes less than 5 % of the total amount of revenues paid by the issuer to its auditor (calculated on the basis of revenues paid by the issuer during the fiscal year when the non-audit services are performed), such services were not recognized by the issuer at the time of the engagement to be non-audit services; and such services are promptly brought to the attention of the audit committee and approved prior to completion of the audit.

60
Q

payroll process

A

separate authorization, recording, and process
initiation - hiring an employee
authorization - something that starts this
processing
recording
custody - giving power to individuals, custody of assets, ex: power to get assets
review/recon
duty

61
Q

control activities

A

authorization(preventative)
documentary controls(audit trail)
safeguarding of assets
reconciliation and review of analysis

62
Q

revenue

A 
existence assertion
risks
significance, likelihood
follow the cycle to see the document trail
cycle 
assertion
risk
63
Q

Management Assessment of Internal Controls.

A

Requires each annual report of an issuer to contain an “internal control report”, which shall:
(1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(2) contain an assessment, as of the end of the issuer’s fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
Each issuer’s auditor shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this section shall be in accordance with standards for attestation engagements issued or adopted by the Board. An attestation engagement shall not be the subject of a separate engagement.
The language in the report of the Committee which accompanies the bill to explain the legislative intent states, “—the Committee does not intend that the auditor’s evaluation be the subject of a separate engagement or the basis for increased charges or fees.
Directs the SEC to require each issuer to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.
Directs the SEC to revise its regulations concerning prompt disclosure on Form 8-K to require immediate disclosure “of any change in, or waiver of,” an issuer’s code of ethics.

64
Q

Corporate Responsibility for Financial Reports.

A

The CEO and CFO of each issuer shall prepare a statement to accompany the audit report to certify the “appropriateness of the financial statements and disclosures contained in the periodic report, and that those financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the issuer.” A violation of this section must be knowing and intentional to give rise to liability.

65
Q

Corporate Responsibility for Financial Reports

A

criminal penalties for certifying a misleading or fraudulent financial report. Under SOX 906, penalties can be upwards of $5 million in fines and 20 years in prison.

66
Q

felony to knowingly

A

destroy financial documents

67
Q

whistle blowers

A

are protected and they can go to an organization and let them know about the fraud

ACCT 5410 (22 decks)

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