exam review - Internal Controls set of rules policies and...

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Internal Controls: set of rules, policies and procedures an organization implements to provide reasonable assurance that: 1. Its financial reports are reliable. 2. Its operations are effective and efficient. 3. Its activities comply with applicable rules and regulations. Risk: any exposure to the chance of injury or loss. Exposure: To describe the potential impact on the entity. Threat: another word used to describe situations because they represent a probable evil, violence or loss to an entity. The significance of a Risk is determined by: 1. Its impact on the organization. 2. The likelihood of it occurring. You cannot have an opportunity without some potential risk, and with every risk there are opportunities. Change creates opportunity, often viewed in a negative light because change creates status quo. The opportunities that an organization seeks are guided by is objectives, With every opportunity there is some element of risk. Materiality of a Risk: o A function of the size of a potential loss and its impact on achieving the organizations objectives, and the likelihood of the loss. o As the likelihood or size of the loss increases, the materiality also increases. o The need to manage risk increases with its materiality. Impossible to control all risks. Enterprises should concentrate on the most significant risk. The significance is determined by: Its impact on the organization
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The likelihood of it occurring. Control the most material risks such that the benefits of controlling the risks exceed the controls. Separation of Duties and Responsibilities
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exam review - Internal Controls set of rules policies and...

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