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76 Cards in this Set
- Front
- Back
corporate governance content
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1) financial reporting of public companies. 2) internal controk
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COSO control envirnment
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management operating style relates ethics. and financial reporting. vs human resource policies ( recruit and evaluate the employee)
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compliance program
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q
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enhanced financial disclosure: SOX
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contigency loss that pending law suit was not accrued
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SOX: internal control : repoting
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assumption of responsibility. assessment of effectiveness of I/c
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SOX. code of ethic provisions
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1 full fair accurate disclosure. 2 honesty ethic conduct
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Sox: audit committee financial expert
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a
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COSO
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a
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external communication vs internal communication
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external: the matter that affecting f/s is communicated with outside party. internal: enable archive objective. variance analysis = to suppirt internal control. internal control information
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COSO monitoring
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deficiencies is identified reported investigated on going and separate evaluation
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COSO: ERM ( enterprise risk management)
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1) risk assessment: the determination of likelihood or impact on the event to achieve the objective of company. 2) control activity: response to a risk
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risk sharing ERM
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insuring against loss or do joint venture
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COSO: an operational objective vs a reporting objective
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COSO: an operational objective. ( within budget) vs a reporting objective.( GAAP)
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IPPF: international
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a
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IIA standards
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the chief audit executive to establish a risk based approach to determine audit priorities
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ERM: enterprise risk management
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1. internal environment. 2. objective setting. 3 event identification. 4. risk assessment 5 risk response. 6 control activities. 7 information and communication. 8 monitoring
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audit comittee
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qualification ( competence independence) a financial expert. responsibilities
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disclosure committee
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to management. a standard reporting package
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compensation committee
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make a recommendation to BOD
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NYSE. NASDAQ rules
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independent of directors. 5 yrs for director &:family member for employee of the company. 3 yrs for NASDAQ. 5yrs for audit firm 3 for nasdaq. 3 yrs for receiving $ 120k other than director compensation
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SEC
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responsible for protecting investors
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COSO
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3 principles : operating efficiency. compliance. F/S. 5 component uCRIME
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control environment
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1. mgmt integrity ethical value. 2. philosophy operating style. 3. organization structure. 4 BOD. AUDIT COMMITTEE participation. 5. inter audit function. 6. personnel policies and practice. 7 . external influences 8 includes set of standards. process and structures
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risk assessment. COSO
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risk assessment for financial reporting. risk= change--- new--- restructuring rapid expand----
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control activity
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authorization. contro of transacton is SOD. documents and records. safeguarding. independent check on performance 2) includes polices procedures that mgmt s directives r carried out. routinely perform controls
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information and communication
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identification retention. transfer of information
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monitoring
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ongoing. and separate evaluation of the quality of IC
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assessment of the effectiveness of ICFR ( internal control over financial reporting )
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SOX 404b: express opinion on IC. auditor. plan & perform. to get reasonable assurance whether material weakness exist. 2 one or more material weakness = IC is not effective.
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control deficiency
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the design or operation of control NOT prevent or detect misstatements on a timely basis
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significant deficiency
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a control deficiency or combination of control deficiencies. less severe than a material weakness
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material weakness
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a or combination of significant deficiency. a reasonable possibility that material misstatements of f/s will not be prevented or corrected in a timely badis
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compensating control
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exist then control deficiency is ordinarily not a significant deficiency or material weakness
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strong indicator of mw
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1 fraud by senior mgmt 2 restatement due error or fraud. 3 mw was not detected by IC. 4 ineffective oversight. 5. compensation for mgmt increase. 6 effect in compliance
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ICFR: PCAOB
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1. unqualified. 2. withdrawal or disclaimer . 3 an adverse ; one or more mw. if remediated by year end then UQ. 4 date should be same ICFR = FR
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defective certifications
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COE 1 M or 10 yrs in prison. willful dc : 5M or 20yr
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risk reduction vs risk sharing
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reducrion: relocation compensating or mitigation control. sharing: a joint venture. buying insurance
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risk assessment
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objective setting--- event identification -- risk assessment -- risk response
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threshold triggers
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mgmt predetermined limits
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inherent risk vs residual risk
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inherent: mgmt nothing to do to alter. residual: risk of event after considering mgmt s response
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ERM limitation
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human judgement. mgmt over ride. cost benefit constraint. collusion. change in environment
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ERP : enterprise resource planning
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1 cross functional system. 2 integrated data f all org activities. 3 automates business work together
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ERM 8 component
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IS EAR AIM internal environment. setting objectives. event identification. assessment of risk risk response. activities - control. information and communication. monitoring
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on line analytical processing vs on line transaction processing system
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analytical: allows end users. to retrieve data from a system and perform using statistics and graphics tool. TPS: customer payment or other transaction. EIS: strategic information. in line info storage system: ex list of charges by month
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financial expert on audit committee
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1. experience with internal controls. 2 understanding of GAAP. internal control. audit committee function
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BOD
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fiduciary relationship to the company6
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Materiality misstatements
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auditors judgment not discuss with corporate governance
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EAR vs APR
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a
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auditor. communication w audit committee
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any disagreement ( even solved) on financial statement
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American option vs European option
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american: during a specific period of time. European : at a specified date
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T - bill
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less than 1yr. denomination of $1k. max 5M purchase. T- note : 1 - 10 yr. T - bond 10 + yr
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credit risk
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the default by borrower or issuer of debts security bonds
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price risk
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a security will decline in value
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open ended fund vs closed end fund
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open= mutual fund
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COSO : reporting objectives
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external internal financial non financial reporting objectives
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C/S with cumulative voting rights
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get one vote for each director
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Dodd-Frank Act of 2010: wall street reform and consumer protection
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insider director of BOD : offer employee. major stockholder. disclose why why not the chairperson of the board is also the CEO
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internal audit charter
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purpose. responsibility. authority
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SOX
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requires CEO to disclose all significant internal control deficiency to company's auditor and audit committee
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IIA the institute of internal auditors
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a risk based approach to determine audit priorities
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ERM
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objective: 4 strategic, operating , compliance, reporting. component:8 CRIME plus object setting. event identification. risk respinse
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evaluators
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individuals that monitor controls within a organization]
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a master file vs a transaction file
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master: permanent file. a source of reference. periodically updated
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the role of the system analyst. the information system manager. the control group. a system programmer
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a
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the Dodd-Frank Act of 2010
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all members of the compensation committee of the board of directors be independent
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SOX : internal control
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3: mgmt responsibility on F/S ; evaluate the effectiveness of IS. ; Auditor attested mgmt s evaluation on F/S
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code of ethic provisions by SOX
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disclosure on F/S and honest ethical conduct
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compliance program
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ethical value to hot line & ethical training program
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COSO: information and communication
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consider system that identify info capture process and distribute info supporting the accomplish of the financial reporting
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COSO: risk assessment
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principle related to consider the risk of material misstatements
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ERM: enterprise risk management
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IS EAR AIM: Internal environment. Setting objectives . Event identification. Assessment of risk. Risk response. Activities (control) Information and communication. Monitoring
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SEC & NASDAQ control on board of directors
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directors independence requirements: 5yrs (3yrs)
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risk tolerance vs risk appetite
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tolerance: the acceptable variation
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risk sharing vs reduction
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sharing: sharing the risk with another party: insurance. joint venture. hedging. reduction: reduce its likely hood or impact.
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application programmmer
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should NOT: operating system software; correct data. ; custody of data
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ERM components |
Coso CRIME + setting objective. + event identification. + risk response |
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BECKER CG |
Becker CG B1.1: # 2. 4. 5. 12. 15. 26. 28. 29. 34. CG B1.2: # 3. 7. 9. |