MODULE 3 Flashcards
What’s the purpose of Internal Controls?
To provide assurance to directors over:
Reliability of financial Reporting
Effectiveness and efficiency of operating
Compliance with Applicable laws
What are the 5 components of Internal Controls?
Control Environment Risk Assessment Process Information Systems Control Activities Monitoring of Control
Describe Control Environment and give an example
Control Environment-Overall Attitude, awareness and actions of directors and management
E.g Management providing a staff manual that’s updated regularly and contains key info on processes
Describe Risk Assessment Process and give an example
The process by which Business risks are identified and managed
E,g Management may organise a quarterly meeting with senior management to discuss key risks
Describe Information Systems and give an example
Companies Use Information Systems to record financial transactions and non financial data to maintain accountability
E.g A payroll system helps staff compute and organise monthly payroll runs
Describe Control; Activities and give an example
Policies and procedures put in place to ensure that their directives are carried out and to mitigate risks
E.g Requiring Significant payments to be authorised by a responsible person
Describe Monitoring of Controls and give an example
Ongoing assessment by management of the performance of the internal control systems
E.g Production of monthly exception reports ( to identify any control deficiencies)
What’s a Business process?
A series of Activities that enable a company to meet.one or more of its objectives
What’s are Accounting Information Systems?
Structures used by organisations to collect, store and process financial and accounting data
What’s the purpose of Control Activities?
They help ensure Managements directives are carried out, I.e Policies and procedures
What are the two types of Control Activities?
Presentative Controls - Stop errors happening in the first place
Detective Controls- These pick errors up after they have happened and allow them to be corrected timorously
What are the 5 categories of control Activities?
Authorisation controls Performance Reviews Information Processing Controls Physical Controls Segregation of Duties
What are Authorisation Controls?
That Transactions are authorised by someone in the same scope
E.g Financing Director reviews and signs off the payroll before payment is made to employees
What are Performance Reviews?
Allow Management to review Information to highlights any exception
Information Processing Controls
Information processing controls a can be broken down into IT General Controls amend application Controls. Application controls then broken into IT Application Controls and Manual Controls
