ACCY304-06%20Int0.%20to%20Control%20Systems

ACCY304-06%20Int0.%20to%20Control%20Systems -...

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Introduction to Control Systems Session 6 February 9, 2011 1 Department of Accountancy University of Illinois at Urbana-Champaign
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2 Internal Control - COSO A process designed to provide reasonable  assurance regarding the achievement of  objectives in the following categories: Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations Department of Accountancy University of Illinois at Urbana-Champaign
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3 Internal Control - COSO Operations  objectives relate to the achievement of an  organization’s basic activity – the fundamental reason for its  existence Examples: financial or geographic growth, infrastructure, EPS or cash flow targets,  product development, process efficiency (speed, cost) Financial reporting   objectives relate to the preparation of  reliable financial statements Compliance   objectives relate to adherence to applicable laws  and regulations Examples: SEC, GAAP, SOX, OSHA, FDA, IRS, etc. Department of Accountancy University of Illinois at Urbana-Champaign
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4 Internal Control Process COSO Internal control consists of five interrelated  components: Control (or operating) environment Risk assessment Control activities Information and communication Monitoring Department of Accountancy University of Illinois at Urbana-Champaign
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5 Internal Control Processes Control (or Operating) Environment The atmosphere in which people conduct their activities  and carry out their control responsibilities “An effective control environment is an environment where competent  people understand their responsibilities, the limits of their authority, and  are knowledgeable, mindful, and committed to doing what is right and  doing it the right way. They are committed to following an organization’s  policies and procedures and its ethical and behavioral standards. The  control environment encompasses technical competence and ethical  commitment.” Department of Accountancy University of Illinois at Urbana-Champaign
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6 Internal Control Processes Control (or Operating) Environment Elements: Policies and procedures (bulletins, handbooks, manuals, etc.) Hiring standards Training Ethics Conflict of interest issues Job descriptions / responsibilities Performance evaluation Accountability and discipline Department of Accountancy University of Illinois at Urbana-Champaign
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This note was uploaded on 08/18/2011 for the course ACCY 304 taught by Professor Bol during the Spring '11 term at University of Illinois at Urbana–Champaign.

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ACCY304-06%20Int0.%20to%20Control%20Systems -...

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