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Flashcards

Internal Controls

Olivia Harlington AAT Level 4 A level English 57 cards

Cards in this deck (57)

  1. 1what is the difference between financial and management accountingfinancial is looking at the past, management is looking to the future
  2. 2what do businesses need to comply with for the AFcompanies act 2006, IFRS, GAAP
  3. 3why do accounts need to be accurateensures stakeholders can trust the data and helps with decision making and cost effectiveness
  4. 4Name and describe the 3 staffing structurescentralised - everything in one place, whole accounting team together, helps promote control and standards
    decentralised - teams in local branches helping with local decision making
    outsourcing - when you pay for a 3rd party to do tasks
  5. 5what can the culture of the accounting function be based on and what determines thisteamwork or individualism
    how much control the management want and the business structure
  6. 6how can a narrow / tall structure motivate employeesmore likely for promotion
  7. 7give 3 examples of internal stakeholdersmanagement, employees, directors
  8. 8give 3 examples of external stakeholdersinvestors, banks, HMRC, suppliers, community, shareholders
  9. 9why do internal stakeholders need info in a timely mannerso they can react quickly to change
  10. 10what is the purpose of statutory financial statementsto interpret all and be able to pick up one and can understand any
  11. 11give 3 reasons for financial statementsdetermine if profit or loss has been made, demonstrate how well the directors have managed, show a true and fair value of the business, help shareholders / new investors see their return
  12. 12give 3 reasons why external stakeholders care about financial statementstax purposes, see if the business can pay its debts, gov can see if accounts are correct eg payroll, could see if the company is being overcharged
  13. 13define economies of scopeefficiencies formed in varieties not volume e.g. if you have cows you can produce meat, milk, cheese etc
  14. 14define internal controlsprocesses designed by governance, management and staff to provide reasonable assurance on financial reporting
  15. 15name the 5 components of internal controlscontrol environment, risk assessment, information systems, control activities, monitoring of controls
  16. 16describe the control environmentattitudes, awareness and actions of management, tone from the top down, structure of accountability (understanding where the line is / having disaplinaries
  17. 17describe control activitiesSupervision, Physical controls, Authorisation, Management, Segregation of duties, Organisation, Arithmetical and Personal competence
  18. 18describe risk assessmentidentifying risks that threaten objectives, evaluating liklihood and impacts, regular review for new threats, RAG ratings
  19. 19describe information systemsmanual / automated elements, packages and websites etc, includes procedures, jounals, ledgers with traces etc
  20. 20describe monitoringregular evaluation of control performance, internal review of system checks, timely updates to respond to changes
  21. 21define frauda crime which the criminal intentionally makes a gain or causes a loss to another person by depriving them of assets
  22. 22give the 3 types of fraudfalse representation, failure to disclose information, abuse of position
  23. 23give the 2 ways fraud can be committedmisappropriation of assets (theft / payment of false employees)
    misstatement of the financial statements (overstating or understating profits or assets)
  24. 24what must controls becycle specific
  25. 25give 3 limitations of internal controlshuman error, collusion with others, rare/unusual transactions, cost-benefit trade offs (if expensive may not bother), limited segregation in small companies
  26. 26define accounting systemssystem that takes raw data as its input, processes this and produces many outputs to meet the information needs of stakeholders
  27. 27name and describe the objectives of the accounting systemcost effectiveness (ensures something is good value for money, takes into account the size of the business)
    reliability (effectiveness and efficiency)
    timeliness (reports are accurate and timely, people need to give the accountants the right info too
  28. 28give 3 risks of computerised systemsdata corruption / loss, cyber attacks / hacking, unauthorised access, hardware/software failure, inadequate backup systems, audit trail manipulation
  29. 29what are the 2 types of control for accounting software systemsgeneral and application
  30. 30describe the general control systemtraining, authorisation, physical security, backups, access controls, segregation of duties, hacking prevention, efficiency measures, recruitment policies, basically anything we consciously do with software
  31. 31describe the application control systemcontrols with the software such as embedded security, audit trails etc
  32. 32give 3 advantages of technology in accountingautomate data entry / processing, enable real time reporting, reduce manual errors, can integrate with other departments such as HR
  33. 33give 3 reasons why organisations would change accounting systemsgrowth and complexity, legislative requirements (eg MTD), technological advances, operational inefficiences (eg human error), strategic shift (eg international expansion may require new currency), stakeholder demands
  34. 34what are the risk assessments for changestaff resistance, data migration errors, security vulnerabilities, 3rd party dependence
  35. 35what is the fraud matrixmap of potential frauds against an organisation with the risks of each of these occurring, documenting the controls over these risks
  36. 36give 2 reasons why a company would use a fraud matrixinvestigates fraud, analyses the controls currently in place to prevent fraud, grades the potential for fraud according to risk
  37. 37what are the 5 steps to help users manage changes from accounting systemsconsultation, communication, training, transition, evaluation
  38. 38give 3 examples of a change that will affect users of accounting systemsforms change, integrated online systems, manual to automatic tracking of time, process/procedure changes, staffing restructures
  39. 39what does a SWOT analysis stand forstrengths, weaknesses, opportunities and threats
  40. 40describe cloud accountingstoring and processing data on other peoples computers and accessing it through the internet
  41. 41name 2 benefits of using cloud accounting instead of desktop accountingcan be more expensive and harder to access as you have to buy per machine and not per user, software updates are automatic and dont necessarily have to be purchased, if the physical office / equipment gets damaged the data is secure
  42. 42describe data analyticsanalysing large amounts of data
  43. 43give 3 benefits of data analyticsas analysing large quantities it can be easier to detect anomolies so helps with fraud prevention, allows for improved forecasting, providing the data is good quality the information is reliable
  44. 44name the 4 types of data analyticsdescriptive, diagnostic, predictive, prescriptive
  45. 45describe descriptive data analyticsdescribes what happens in the past
  46. 46describe diagnostic data analyticshelps understand why something has happened
  47. 47describe predictive data analyticsanalyses what happens in the past to predict what will happen in the future
  48. 48describe prescriptive data analyticshelps decide what to do next
  49. 49what are the 2 key objectives on internal controlsno one person has full control of a transaction from beginning to end, all work is checked and supervised by someone else in the organisation
  50. 50name and describe the 3 control typesphysical (stock checks, safes)
    personnel (everyone needs to be competent)
    arithmetical (to check if figures are correct e.g. reconciliations)
  51. 51what does PESTLE stand forpolitical, economic, social, technological, legal, environmental
  52. 52give 3 examples of political in a PESTLE analysispolicies and laws, stability, corruption
  53. 53give 3 examples of economic in PESTLE analysisgrowth, inflation, interest rates, employment
  54. 54give 3 examples of social in a PESTLE analysispopulation, ageing, career views, lifestyle, cultural barriers
  55. 55give 3 examples of technology in PESTLE analysistechnology incentives, innovation, automation, R&D activity, obselescance
  56. 56give 3 examples of environment in PESTLE analysisclimate change, ethical, recycling, sustainability, walk to work
  57. 57give an example of legal in a PESTLE analysisantitrust, labour, copyright, data protection, health and safety

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A level AAT Level 4 Flashcards on Internal Controls, created by Olivia Harlington on 12/06/2025.
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