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24 Cards in this Set

  • Front
  • Back
committee of sponsoring organizations of the treadway commission, studies issues regarding internal control
five mgmt assertions
assertions about: existence or occurrence, completeness, allowance or valuation, rights and obligations, presentation and disclosure
assertions-existence or occurrence
statements that items on the balance sheet really existed on the balance sheet date and that transactions reported in the income statement in fact took place during the year (fin stmt users)
deal with the issue of whether all accounts and all transactions have been properly accounted for (investors)
assertions-allowance or valuation
pertain to the measurement of the financial statement elements, correct quantity and price to properly including items and summing correctly
assertions-rights and obligations
deal with the issue of whether the assets are really the rights of the company and whether the debts are really its obligations
assertions-presentation and disclosure
assertions that everything that needs to be disclosed and explained to the investment community has been disclosed and explained in the report
internal control system
set of policies and procedurs that collectively provide a reasonable assurnace that the entity accomplishes its goals of effective and efficient operations, reliable financial reports, and compliance with laws and regulations
five components of internal control system
control environment, control activities, risk assessment, information and communication, monitoring
control environment
comprises the actions and behaviors that indicate how manangers and directors feel about control issues, demonstrates the overall attitude toward ethics
three structural elements of control environment
board of directors, audit committee, internal auditors
risk assessment
deals with the identification and analysis and the quantification of the risks that managers face
control activities
policies and procedures implemented by managers to assure that specific goals are met (procedures carry out policies)
information and communication
information sent to managers and directors to help assess the firm's current position and what needs done to reach the firm's goal
continual assessment of the system's performance
control objectives
safeguard the assets of the entity, engage only in those transactions authorized by mgmt, record all transactions completely and accurately, safeguard the acctg records
control activities
maintenance of adequate acctg records, assignment of authority and responsibility, limited access to assets, independent verifications, segregation of duties, authorization of transactions
assignment of authority and responsibility
match authority and responsibility
authorization of transactions
the firm should engage in no transaction unless it has been authorized by mgmt (approval)
maintenance of adequate acctg records
trustworthy data captured by the appropriate documents and records
acctg records-input and output documents, journals, ledgers
limited access to assets
allow access to certain assets only to those individuals who have the authority to obtain access(inventory, cash, pp&e)
independent verification
procedures that check up on individuals and the TPS (reconciliation)
segregation of duties
segregate functions that if combined, might cause difficulties with achieving the objectives of the internal control system
common audit procedures for cash
surprise visits to petty cash fund, comparing cancelled checks with cd journal, examine cancelled checks, compare bank deposit tickets with the cr journal, bank reconciliations