Managerial Accounting

Managerial - Internal Controls Auditing What are internal controls Internal controls are procedures or systems which are designed to 1 Promote

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What are “internal controls”? Internal controls are procedures or systems which are designed to: 1. Promote efficiency 2. Safeguard assets 3. Avoid fraud and errors 4. Keep accounting data accurate Five components of Internal Controls: 1. Control environment : Tone at the top 2. Risk assessment : Determine what is at risk 3. Control activities : Protect what is at risk 4. Information and communication : Let everyone know the procedures 5. Monitoring : Follow up to see how the procedures are working. 6. Other Services Provided by Independent Auditors : Review: A review is another service provided by CPAs. It gives the reader limited assurance, less than with an audit because the CPA conducts fewer tests on the entity’s books and records. In a review, the CPA is attempting to assess only (1) whether management’s representations are accurate and (2) whether or not the company is correctly applying generally accepted accounting principles (GAAP). In a review, CPAs usually inquire about the accounting procedures of the company and perform analytical procedures in an attempt to recognize any unusual transactions or trends. While these procedures are more limited than those of an audit, they are generally sufficient to allow the CPA to express a limited assurance about the financial statements. A review may be used instead of an audit by companies whose stock is “ privately-held ”. This means that their stock is not exchanged on a public stock exchange. (Companies whose stock is exchanged on a public stock exchange are called publicly-held ”.) A review gives the readers of the financial statement the limited assurance of the CPA’s who reviewed the books and records, and in many situations that limited assurance is sufficient. Compilation:
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This note was uploaded on 01/06/2012 for the course BUS-A 100 taught by Professor Tiller during the Fall '08 term at Indiana.

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Managerial - Internal Controls Auditing What are internal controls Internal controls are procedures or systems which are designed to 1 Promote

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