AIS Ch 3

Mer som dette

Epidemiology

Ved Michelle Prentice

Module A Comparative

Ved Lilian Whitehead

The 8 Functional Areas of Human Resources

Ved July Alejandra Sierra Velandia

Dystopia

Ved MERCEDES DEBUCHY

AIS Ch 3 Internal Controls

Internal Control Introduction

Development

FCPA

FOREIGN CORRUPT PRACTICES ACT (1977)

addresses issue of bribery and other illegal (in the U.S.) activities by requiring multinational organizations to implement sound internal controls

SOX

SARBANES-OXLEY ACT (2002)

enacted in response to wave of financial fraud in 1980s-90s.

makes mgmt accountable for assessing and maintaining internal controls

Definition and elements

Internal Control:

-is a process, subject to improvements and analysis

-involves members of the organization and must take into consideration effects of behavior on the execution of the process as well as effects of the process on behavior

-cannot provide absolute assurances, but with ongoing ananlysis and improvements, can reasonably assess situations

-operates over a variety of departments and processes

Purposes

1. safeguard assets

2. ensure reliability of financial stmts

3. ensure operating efficilency

4. ensure compliance with mgmt's directives

Professional associations COSO

Makeup

Financial Executives Institute

Institute of Internal Auditors

institute of Management Accountants

American Institute of CPAs

American Accounting Association

Integrated framework

-control environment (executive support)

-control activies

(preventive, detective, corrective)

-risk assessment

-monitoring (ongoing assessment of IC performance)

-information and communicaiton

Methods

-adequate documentation (changing rapidly in an increasingly paperless atmosphere)

-backup of electronic files

-bank rec

-document matching

-edit checks

-insurance & bonding

-limit checks

-physical security

-preformatted date entry interface

-separation of duties

many others

Risk

Risk structure

taxonomy = organizational structure for knowledge

Other risk taxonomies

Brown's Risk Taxonomy

Fianacial Risk

-market risk (stock prices, investment values, interest)

-credit risk (nonpayment)

-liquidity risk (too much $$ tied up in long-term assets)

Operational Risk

-Systems risk (IT)

-human error

Strategic Risk

Concerned with executive & director behavior

-legal/regulatory risk (breaking laws, failing to comply with regs)

-Business strategy risk (poor decision making)

Hazard Risk

-directors' and officers' liability

(idiocy on the executive level)

Hollander, Denna, & Cherrington Risk Taxonomy

-strategic risk

-decision risk

-operating risk

-financial risk

-information risk

Understanding Risk

Risk professionals

Risk professionals organize risks involved in running the company to make better use of historical and forecasted information.

Different structures probably allow for specialization of risk management, depending on the industry/activity of the organization.

Can affect businesses' bottom line