Exam II Study Guide

Exam II Study Guide - Exam II Study Guide (Ch 7, 8, 9)...

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Exam II Study Guide (Ch 7, 8, 9) Chapter 7 General topics: Why Internal controls? Response to corporate scandals (i.e. Enron and Tyco) To ensure shareholders’ SOX section 404 requires management/auditors to document, test, and report effectiveness of internal controls over FR What are they? A process for accomplishing objectives. Who prescribes them? Entity’s board of directors, management, and other personnel. Are they mandatory? Yes, due to SOX section 404. What is the relation between internal control framework and other topics discussed in the chapter? Internal controls are implemented last. First, establish mission and purpose, then strategy and objectives to achieve mission, then assess risks, then determine how to respond to risks, finally put controls in place. What is the history of internal controls in business reporting? Internal controls became required after the establishment of the SOX of 2002. This required companies to test and implement internal controls in response to recent corporate scandals that resulted in huge sums of money being lost for investors. Will it be on the CPA exam? Yes. What SOX has to do with internal controls? SOX has created and developed a series of rules that guide auditors. In addition they have created an oversight board. Also, Section 404 requires management/auditors to document, test, and report effectiveness of internal controls over FR. Did anyone define internal controls and what is it? Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control: A process – effected by an entity’s board of directors, management, and other
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This note was uploaded on 04/20/2010 for the course AIS 345 taught by Professor R during the Spring '10 term at Bryant.

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Exam II Study Guide - Exam II Study Guide (Ch 7, 8, 9)...

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