Internal systems and controls Flashcards
What are the purpose of controls?
1) Compliancy with rules and regs
2) Accuracy of transactional processing
3) Accounting info is reliable, accurate and on time
4) Protect from loss due to error/fraud
5) Efficiency and cost effectiveness
6) Deter, detect and correct fraud
Who is responsible for implementing changes relating to VAT?
ALL directors
What are the 4 types of resources?
1) Equipment and materials
2) Human
3) Financial
4) Information
What is a stakeholder?
A person or organisation that has an ‘interest’ in another organisation
Define sustainability
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs
What are the principles of sustainability?
1) Economic growth e.g. fair pricing and fair wage
2) Environmental protection
3) Social equality e.g. employing local labour and sponsoring local charity events
What is an internal control?
A process for assuring the organisation can achieve its objectives with respect to operational effectiveness and efficiency, reliable financial reporting and compliance with laws, regulations and policies
Name 8 types of control
1) Segregation
2) Organisation e.g. procedures
3) Authorisation
4) Physical
5) Supervision
6) Personnel (qualified, competent)
7) Arithmetical and accounting (reconciliations)
8) Management
How do internal controls impact ethics?
1) Communicating to staff expectations
2) Ensuring good training and due care
3) Encouraging professionalism
4) Sets objective decision making criteria
What are the causes of weaknesses in internal controls?
1) Too few controls (fast growing, poor design)
2) Controls not properly implemented (new untrained staff)
3) No management oversight (too busy or systems overriden when in a hurry)
4) Outcomes not monitored (too busy or ‘trust’ their staff)
Define fraud
The use of deception with the intention of obtaining an advantage, avoiding and obligation or causing loss to someone else or to an organisation
Define the 4 types of fraud
1) Theft - dishonestly taking others property
2) False accounting - dishonestly destroying, defacing, concealing or falsifying an accounting record for personal gain or to cause loss to someone else
3) Bribery and corruption - giving or receiving a bribe to influence other people’s behaviour
4) Deception - used to obtain something or evade liability
What 3 things lead to fraud?
1) Opportunity
2) Motivation
3) Rationalisation
What are the management responsibilities regarding fraud?
1) Identify fraud risks
2) Set up controls
3) Monitor
4) Deal with any incidents
Define analytical review
A substantive test concerned with the completeness, accuracy and validity of transactions and account balances and the existence of assets and liabilities
What is the purpose of an internal control questionnaire?
To identify the existence of internal controls that meet control objectives
What is standing data?
Information held on file that does not change often but must be kept up to date and amendments to it require authorisation
What are the key features of cloud accounting?
- Data stored remotely
- Data automatically updated
- Allows multiple users from different locations
- Paid for monthly/annually based on number of users
What are the benefits of cloud accounting?
1) Working at home saves travel time and money
2) Shared access - at speed and unlikely to be lost/stolen
3) Reduces paper use/sustainability
4) Lower IT costs - no hardware/back up cost, fewer IT staff required
5) Better security - automatic back up
What are the risks of cloud accounting?
1) Control & security of data - third party has sensitive/confidential data. Internet could lead to unauthorised access
2) Reliant on internet access
What are the applications of intelligent accounting?
1) Coding of data
2) Audit of information
3) Predictive models to forecast data
4) Analysing multi-dimensional data
What are the risks with intelligent accounting?
1) Expensive
2) Can make mistakes and be hard to trust
3) Employee concerns that they will lose their jobs
What are the 4 types of data analytics?
1) Descriptive
2) Diagnostic
3) Prescriptive
4) Predictive
What are the benefits of data analytics?
1) Automated reporting
2) Speeds up reporting and decision making
3) Reduces risk of fraud
4) Identifies opportunities to work smarter
What are the risks of data analytics?
1) Expensive
2) Ethical concerns due to assumptions made
What are the 4 main risks to data and operations?
1) Cyberattacks
2) Unauthorised access
3) Loss of computer equipment
4) Data issued in error
Define cyberattack and the types
An attempt by hackers to gain access to, damage or destroy a computer network or system e.g.
1) Phishing - email asking for info pretending to be a reputable supplier
2) Malware - viruses hidden in attachments
3) Ransomware - prevents access unless payment is made
How should unauthorised access be prevented?
1) No sharing passwords
2) Strong firewall
How should loss of computer equipment be prevented?
1) Clear policies on looking after equipment
2) Making staff personally responsible for items
A dashboard is a feature of what system?
Executive information system
What are the 4 V’s of Big data?
1) Volume
2) Velocity
3) Veracity
4) Variety
What are logical access controls?
They restrict virtual as opposed to physical access
What is hash total?
Adding together numbers that do not usually have a meaningful total to detect any errors
What is a check digit?
It is calculated based on the preceding string of numbers to validate the accuracy of data entry
