Chapter 10 - Internal Controls COSO

N includes n accounting system identifying recording

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n Includes: n Accounting system: identifying, recording, processing, summarizing, and reporting information regarding economic states and events n Non-accounting information: demographic, economy, competition, market, global economy, regulatory
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+ Information and Communication Systems n Communication Channels: n Formal: financial statements, press release, contracts, documents n Informal: memos, emails, bulletin boards, meetings n External: to outsiders of the company – usually formal communication n Internal: within the company – usually informal communication
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+ Information and Communication Systems n Qualitative Characteristics of Information: RELEVANCE RELIABILITY 1. Predictive value 2. Feedback value 3. Timeliness 1. Verifiability 2. Representational faithfulness 3. Neutral
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+ Risk Assessment n The set of processes/mechanisms designed to establish objectives for financial reporting, operations, and compliance – and to identify, analyze, and manage the risks of not reaching them. n Risks: n External risks: industry, competitors, regulation, economy, customers, suppliers, etc n Internal risks: people, process, information systems n Risk Process: n Identify risks – error/fraud risk n Assess risks - likelihood, significance n Manage risks - eliminate, mitigate, ignore
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+ Risk Map
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+ Control Activities n The set of policies and procedures designed and performed to address/manage risks related to internal control objectives.
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