Chapter 4 Internal Control

1. Chapter 4Internal Control Bus 319 Accounting Information Systems

2. Megan What is the Foreign Corrupt Practice Act of 1977

3. Foreign Corrupt Practice Act of 1977 A process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, … , to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

4. Foreign Corrupt Practice Act of 1977 • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the registrant; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

5. Jen C What is the Sarbanes-Oxley Act of 2002

6. What is the Sarbanes-Oxley Act of 2002 • Management must: • assess and test the effectiveness of the internal controls • report their findings on the effectiveness of the internal controls • The independent auditor must: • assess and test the effectiveness of the internal controls • report their findings on the effectiveness of the internal controls

7. Matt S What are the four primary components of Brown’s taxonomy of risk

8. Brown’s Taxonomy of Risk • Financial Risk • Operational Risk • Strategic Risk • Hazard Risk

9. Preston Can you name the three elements of Financial Risk

10. Brown’s Taxonomy of Risk – Financial Risk • Financial Risk • Market risk • Credit risk • Liquidity risk

11. Vincent Can you name the two elements of Operational Risk

12. Brown’s Taxonomy of Risk – Operational Risk • Operational Risk • Systems risk • Human error

13. Yannine Can you name the two elements of Strategic Risk

14. Brown’s Taxonomy of Risk – Strategic Risk • Strategic Risk • Legal and regulatory risk • Business strategy risk

15. Erika Can you name the element of Hazard Risk

16. Brown’s Taxonomy of Risk – Hazard Risk • Hazard Risk • Directors’ and Officers’ liability

17. Allie Can you name the five components of the COSO internal control framework

18. COSO Internal Control Framework • Control environment • Risk Assessment • Control Activities • Information & communications • Monitoring

19. Wesley Can you name the five Control Activities

20. Control Activities • Insurance and bonding • Internal audit • Limit checks • Lockbox systems • Physical security • Preformatted data screens • Prenumbered documents • restrictive endorsement • Daily deposit of checks • Segregation of duties • Training • Adequate documentation • Background checks • Backup computer files • Backup power supplies • Bank reconciliation • Batch control totals • Data encryption • Document matching • Edit checks • Firewalls

21. Victoria Can you name the eight components of Enterprise Risk Management framework

22. Enterprise Risk Management Framework • InternalControl environment • Objective Setting • Event Identification • Risk Assessment • Risk Response • Control Activities • Information & communications • Monitoring