WEEK 4: CONTROL & ACCOUNTING IS Flashcards
Business exposure to risks ( in terms of technology/it development ) leading to control failure
- more IS means info available to more people
- decentralized / distributed networks - makes it difficult to implement central controls
- wide area networks compromising confidentiality
inherent idiosyncratic material risks of the currency ( crypto )
- business risk:
( value is strictly determined by the value that market participants place on them through their transactions, which means that loss of confidence may bring about a collapse of trading activities and an abrupt drop in value) - not backed:
- cyber/fraud risk :
( cryptocurrency is highly reliant upon unregulated companies, including some that may lack appropriate internal controls & , If the keys are stolen to a user’s wallet, the thief can fully impersonate the original owner of the account and has the same access to the monies in the wallet that the original owner has)
> associated risks also include
- operational risks
- regulatory/ compliance risk
- market risks
challenges in accounting for cryptocurrencies
- not backed & not cash
- volatile
- not financial instrument - no right to something
- how do we classify then?
why do we need controls - this links to “what is internal control”
- assurance in terms of business processes
- mitigate risk
- assurance in terms of laws
4 Internal control objectives ( similar to GAA )
- to safeguard assets
- to check the accuracy and reliability of accounting data
- to promote operational efficiency
- to encourage adherence to prescribed managerial policies
Primary objective of AIS
- control the organization so it can achieve objectives
- includes people - people who use frequently should be able to detect and correct/ minimize system threats, systems can be complex so this is essential
Types of internal controls
- Preventive controls
- Detective controls
- Corrective controls
General and application controls
important general:
1. Information systems management controls
- Security management controls
- Information technology infrastructure controls
- Software acquisition, development, and maintenance controls
Application controls - IOI of data
Five interrelated components of internal control
- control environment
- risk assessment
- control activities
- information &communication
- monitoring
The Sarbanes-Oxley and Foreign Corrupt Practices Acts 1977
- The primary purpose of this Act was to prevent the bribery of foreign officials in order to obtain business
- Applies to publicly held companies and their auditors and was intended to prevent financial statement fraud, make financial reports more transparent, provide protection to investors, strengthen the internal controls at public companies, and punish executives who perpetrate fraud.
New rules for auditors CPA
COMMITEE
Audit committee members must be on the company’s board of directors and be independent of the company ( committee )
MANAGEMENT:
Requires the CEO and CFO to certify that financial statements and disclosures are fairly presented, were reviewed by management, and are not misleading.
Management can be imprisoned up to 20 years and fined up to $5,000,000.
INTERNAL CONTROL REQUIREMENTS:
Requires publicly held companies to issue a report accompanying the financial statements that states management is responsible for establishing and maintaining an adequate internal control structure and appropriate control procedures.
aftermath Barbanes-Oxley Act
- evaluations must be based on recognized control frameworks ( COSO)
- disclose any and all material internal control weaknesses
- conclude that a company does not have effective internal controls over financial reporting is there are any material weaknesses.
IT governance involves
- Value delivery :
- strategic IT alignment
- Risk management
- Resource management
- performance management
Risk IT
providing a framework for enterprises to identify, govern and manage IT risk
Allows an enterprise to make appropriate risk-aware decisions
VAL IT
Enables the creation of business value from IT-enabled investments
Integrates governance principles, processes, practices and supporting guidelines that help boards, the executive and other enterprise leaders to optimise the realisation of value from IT investments
