Week 2 - Audit 2 Flashcards
What is the role of internal audit in the control environment?
Internal audit ensures the effectiveness of controls and reports to the audit committee.
What is the purpose of internal control systems?
To prevent, detect, and correct unwanted events while ensuring financial data integrity.
What are the three categories of internal control objectives?
- Operational effectiveness & efficiency (O)
- Financial reporting reliability (F)
- Compliance with laws & regulations (C)
What are the key elements of internal control?
Control environment, accounting systems, and quality control processes.
What is the COSO framework?
A model defining five key components of internal control:
- Control Environment – Sets the tone of internal control culture.
- Risk Assessment – Identifies and manages risks.
- Control Activities – Policies ensuring risk mitigation.
- Information & Communication – Ensures accurate and timely data sharing.
- Monitoring – Continuous evaluation of controls.
Why is the control environment important?
It provides the foundation for all other control measures. A weak environment makes controls ineffective.
How do businesses manage risks?
By identifying, analyzing, and integrating risk management into their operations.
What are examples of control activities?
Authorizations, verifications, reconciliations, and segregation of duties.
What is the role of information and communication in internal control?
To ensure timely and accurate reporting of financial data for decision-making.
Why is monitoring necessary in internal control?
To review and improve control effectiveness over time.
