Internal Audit - Internal Control

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1.Framework

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a body of guiding principles that form a template against which organizations can evaluate a multitude of business practices.

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2. ICFR

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Internal Control over Financial Reporting.

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3. Internal control (COSO’s definition

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)- a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations; reliability of financial reporting; and compliance with applicable laws and regulations.

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4. The components of internal control

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control environment; risk assessment; control activities; information and communication; and monitoring.

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5. Critical success factors

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successes that must be accomplished for objectives to be achieved.

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6. Segregation of duties

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dividing control activities among different people to reduce the risk of error or inappropriate actions taken by any single individual.

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7. Actions speak louder than words

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managements actions powerfully communicate what is important to the organization.

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8. Deficiency

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“a condition within an internal control system worthy of attention” that may represent a perceived, potential, or real shortcoming, or opportunity to strengthen the internal control system to provide a greater likelihood that the entity’s objectives will be achieved.

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9. Tone at the top

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the entity wide attitude of integrity and control consciousness, as exhibited by the most senior executives of an org. CEO sets the tone at the top.

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10. Reasonable assurance

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a level of assurance that is supported by generally accepted auditing procedures and judgments.

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11. Inherent limitations of internal control

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the confines that relate to the limits of human judgment, resource constraints and the need to consider the cost of controls in relation to expected benefits, the reality that breakdowns can occur and the possibility of collusion or management override.

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12. Controllable risk-

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the portion of inherent risk that management can reduce through day-to-day operations and management activities.

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13. Entity level control

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a control that operates across an entire entity and is not bound by, or associated with, individual processes.

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14. Process level control

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an activity that operates within a specific process for the purpose of achieving process level objectives.

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15. Transaction level control

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an activity that reduces risk relative to a group or variety of operational-level tasks or transactions within an organization

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16. Key control

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an activity designed to reduce risk associated with a critical business objective.

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17. Secondary control

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an activity designed to either reduce risk associated with business objectives that are not critical to the org’s survival or success or serve as a backup to a key control.

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18. Compensating control

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an activity that, if key controls do not fully operate effectively, may help to reduce the related risk.

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19. Complementary control

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an activity that, when taken together with other controls, contributes to the overall effective mitigation of risk.

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20. PCAOB

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the U.S. Public Company Accounting Oversight Board