Chapter 3 - Internal Controls (IC)
COSO Framework
It's a process
Involves people in the organization
Designed to provide "reasonable assurance"
Effect areas such as Operations, Financial Reporting, and Human Behavior
Brown's Risk Taxonomy
Financial Risk
Market Risk - stock price, investment values, interest rates, etc.
Credit Risk - payment from people who owe money
Liquidity Risk - sufficient cash for ST obligations
Operational
System Risk
Human Error
Strategic Risk
Legal and Reulatory Risk
Business Strategy Risk
Hazard Risk
Directors' and officers' liability - any big risk (Enron)
COSO Framework
The organization responsible for maintaining ICs.
Control Enviornment
tone from the top of the organization
Risk Assessment
Evaluating internal control, external and internal auditors
Control Activities
Preventive, Detective, and Corrective Controls - SOC I Reports
Info & Communication
installing virus protection, correct user access
Monitioring
continual process, exaple is internal auditors
Foreign Corrupt Practices Act, 1977
Help clean up bribes, international fraud, accounting, and other business acts
Sabanes-Oxley Act, 2002
External audit of IC, Required Disclosures to SEC, Management Certification, Management Signatures