10_Internal_Control

10_Internal_Control - Econ185Lecture10InternalControl Econ...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 185 Lecture 10 Internal Control 1 Econ 185 Glenn Owen UC Santa Barbara ` Internal control defined ` COSO reports ` Control environment ` Preventive, detective, and corrective controls ` Common control activities ` Cost/benefit analysis ` Case examples ` An internal control system consists of the various methods and measures designed into and implemented within an organizational system to achieve the following four objectives: safeguard assets accuracy and reliability of accounting information promote operational efficiency encourage adherence to company policies.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Econ 185 Lecture 10 Internal Control 2 Year Act Recommendation 2002 Sarbanes-Oxley Requires publicly traded companies to issue an “internal control report” that states management is responsible for establishing and maintaining an adequate internal control structure Mt t t h f f t i Management must assess the effectiveness of internal controls annually The independent auditor for the firm must attest to and report on managements’ assessment annually 1992 & 2004 COSO Includes five components (control environment, risk assessment, control activities, information and communication, and monitoring) and adds three additional components: objective setting, event identification, and risk response ` Control environment ` Risk assessment ` Control activities ` Information and communication ` Monitoring ` Objective setting ` Event identification ` Risk response
Background image of page 2
Econ 185 Lecture 10 Internal Control 3 ` Preventive controls are those that management puts in place to prevent problems from occurring. ` Detective controls alert us when the Detective controls alert us when the preventive controls have failed ` Corrective controls are procedures a company uses to solve or correct a problem. ` A good audit trail ` Sound personnel policies and practices ` Separation of duties ` Physical protection of assets ` Internal reviews of controls ` Timely performance reports ` Only those controls whose benefits are expected to be greater than, or at least equal to, the expected costs are implemented.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Econ 185 Lecture 10 Internal Control 4 ` As a recently hired internal auditor for the Emerson Department Store (which has approximately 500 employees on its payroll), you are currently reviewing the store’s procedures for preparing and distributing the weekly payroll. These procedures are as follows.
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

10_Internal_Control - Econ185Lecture10InternalControl Econ...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online