Internal Controls

Internal Controls - Information Systems Controls Agenda...

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Information Systems Controls
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Agenda Internal Controls Concepts General Controls for information Systems Internet Controls
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OVERVIEW OF CONTROL CONCEPTS Internal control is the process implemented by the board of directors, management, and those under their direction to provide reasonable assurance that the following control objectives are achieved: Assets (including data) are safeguarded. Records are maintained in sufficient detail to accurately and fairly reflect company assets. Accurate and reliable information is provided. There is reasonable assurance that financial reports are prepared in accordance with GAAP. Operational efficiency is promoted and improved. Adherence to prescribed managerial policies is encouraged. The organization complies with applicable laws and regulations.
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OVERVIEW OF CONTROL CONCEPTS Internal control systems have inherent limitations, including: They are susceptible to errors and poor decisions. They can be overridden by management or by collusion of two or more employees. Controls to safeguard assets may also reduce operational efficiency. Internal control provides reasonable , rather than absolute, assurance, because complete assurance is difficult or impossible to achieve and prohibitively expensive.
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SOX In the late 1990s and early 2000s, a series of multi-million-dollar accounting frauds made headlines. The impact on financial markets was substantial, and Congress responded with passage of the Sarbanes-Oxley Act of 2002 (aka, SOX ). Applies to publicly held companies and their auditors
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SOX The intent of SOX is to: Prevent financial statement fraud Make financial reports more transparent Protect investors Strengthen internal controls in publicly-held companies Punish executives who perpetrate fraud SOX has had a material impact on the way boards of directors, management, and accountants operate.
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SOX Important aspects of SOX include: Creation of the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing profession. New rules for auditors New rules for audit committees New rules for management New internal control requirements
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Agenda Internal Control Concepts
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Internal Control The COSO (Committee of Sponsoring Organizations) study defines internal control as the process implemented by the board of directors, management, and those under their direction to provide reasonable assurance that control objectives are achieved with regard to: - effectiveness and efficiency of operations - Safe guard of assets reliability of financial reporting compliance with applicable laws and regulations
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Internal Control Classifications The specific control procedures used in the internal control and management control systems may be classified using the following four internal control classifications: 1. Preventive, detective, and corrective controls 2. General and application controls 3. Input, processing, and output controls
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Internal Controls - Information Systems Controls Agenda...

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