week 2 - Audit 1 Flashcards
What are control activities in an internal control system?
Policies and procedures established to address risks and ensure objectives are met.
What are examples of control activities?
Authorizations, verifications, reconciliations, segregation of duties, and operational reviews.
What are examples of control procedures?
- Authorizations
- performance reviews
- arithmetic controls
- physical controls
- segregation of duties
- comparisons of book to actual amounts
- accounting reconciliations
- supervisory controls
- IT application controls
What is the role of information and communication in internal control?
Ensures that necessary information is identified, captured, and communicated in a timely and appropriate manner.
What is monitoring in an internal control system?
The ongoing review and adjustment of control processes to respond to changing conditions.
What are key methods of monitoring?
Management controls, supervisory controls, internal audit (key monitoring function).
Why must monitoring results be provided in a timely manner?
To ensure the system remains dynamic and adapts to changing conditions.
What are the three categories of internal control objectives?
- Operational effectiveness and efficiency (O)
- Reliability of financial reporting (F)
- Compliance with applicable laws and regulations (C)
How are the five components of internal control related to the control objectives?
They are actions necessary to achieve the three internal control objectives (O, F, C).
What is the significance of the “internal control cube”?
It represents the interrelationship between the five components of internal control and how they apply to different parts of an organization.
