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Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation

Learn about the Annual Certification of Internal Controls and its impact on auditing in this informative webcast series on Sarbanes-Oxley. Understand the methodology, testing, FDIC certification experience, and external auditor attestation. Explore requirements, issues, material weaknesses, and more.

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Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation

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  1. Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation

  2. Annual Certificationof Internal Controls The Internal AuditDepartment’s Role The Institute of Internal Auditors Webcast Series on Sarbanes-Oxley Session #2 - March 3, 2003

  3. The Webcast Series on Sarbanes-Oxley’s Impact on Internal Auditing • January 28 - Disclosure Controls - Available in online archive and on CD Rom • March 3 - Annual Certification of Internal Controls • April 1 - Coordination of Internal & External Audit Work • April 15 - Looking Ahead to Future Changes Impacting Internal Auditing • Tuesdays from 1:00 - 2:30 p.m. EST

  4. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  5. Requirements (proposed) • Statement of Management’s Responsibilities (establishing & maintaining) • An assessment, at end of the most recent fiscal year • Effectiveness of internal controls • Procedures for financial reporting • Reporting to audit committee & external auditor any significant deficiencies and material weaknesses in the design or operation of internal controls • External auditor attestation

  6. Internal Controls ??? • “A Process,Effected by an Entity’s Board of Directors, Management and Other Personnel, Designed to Provide Reasonable Assurance Regarding the Achievement of Objectives in the Following Categories: • Effectiveness & Efficiency of Operations • Reliability of Financial Reporting • Compliance with Applicable Laws and Regulations.” Source: COSO

  7. Control Components Used to evaluate overall company’s accomplishment of objectives and specific processes’ performance: • Control environment • Risk assessment • Control activities • Information and communications • Monitoring

  8. Management’s Assessment Process designed to provide reasonable assurance: • Transactions properly authorized • Access to assets controlled against unauthorized or improper use • Transactions recorded to • Permit preparation of FS (GAAP) • Maintain accountability of assets • Controls in place to ensure proper reporting for external purposes

  9. Issues • Definition of internal controls? • Financial • Operational • Compliance • What is the level of internal control documentation needed? • How to test & evaluation criteria? • Process or organizational driven? • Requirements for attestation?

  10. Material Weakness • Impact of control structure on preventing • Errors • Fraud • Not detected in • Timely manner • Normal course of work • Material impact on financial statements • Material = influence decisions made based on financial information

  11. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Documentation Tools - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  12. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  13. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  14. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  15. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

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