Flashcards
COSO Chapter 1-4
Cards in this deck (21)
- 1What is the purpose of COSO framework?to help
management better control the organization and to provide a board of directors with
an added ability to oversee internal control. - 2What is an internal control?Internal control is a process, effected by an entity’s board of directors, management,
and other personnel, designed to provide reasonable assurance regarding
the achievement of objectives relating to operations, reporting, and compliance. - 3What are benefits of internal control system?A system of internal control allows management
to stay focused on the organization’s pursuit of its operations and financial
performance goals, while operating within the confines of relevant laws and minimizing
surprises along the way. Internal control enables an organization to deal more effectively
with changing economic and competitive environments, leadership, priorities, and
evolving business models. - 4Describe operations objectives.These pertain to effectiveness and efficiency of the
entity’s operations, including operational and financial performance goals, and
safeguarding assets against loss. - 5Give examples of operations objectives.operations objectives may relate to improving financial performance, productivity
(e.g., avoiding waste and rework), quality, environmental practices, innovation, and
customer and employee satisfaction. - 6What are reporting objectives?These pertain to internal and external financial and
non-financial reporting and may encompass reliability, timeliness, transparency,
or other terms as set forth by regulators, standard setters, or the
entity’s policies. - 7Describe external financial reporting objectives.Entities need to achieve external
financial reporting objectives to meet obligations to and expectations of stakeholders. Management may also be required to publish financial
statements using objectives set forth by rules, regulations, and standards. - 8Describe external non-financial objectives.Management may report
external non-financial information in accordance with regulations, standards,
or frameworks.(for example report on the effectiveness of internal control) - 9What are internal financial and non-financial reporting objectives.Internal reporting
to management and the board of directors includes information deemed necessary
to manage the organization. Internal reporting objectives vary among entities - 10Give an example of external financial reportingannual financial statements, interim financial statements, earnings releases
- 11Give an example of non-financial informationSustainability reports, reports on internal controls
- 12Give an example of internal financial reportingDivisional financial statements, cash flow/budget
- 13Give an example of internal non-financial reportingKey Risk indicator dashboards, board reporting, staff/asset utilization
- 14What are compliance objectives?These pertain to adherence to laws and regulations
to which the entity is subject. - 15Explain effective internal controlAn effective system of internal control provides reasonable assurance regarding
achievement of an entity’s objectives. An effective system of internal control reduces, to
an acceptable level, the risk of not achieving an objective relating to one, two, or all
three categories. It requires that:
•• Each of the five components of internal control and relevant principles are
present and functioning
•• The five components are operating together in an integrated manner - 16What is internal control deficiency?The term “internal control deficiency” refers to a shortcoming in a relevant principle
or associated component that has the potential to adversely affect the ability of the
entity to achieve its objectives - 17What is major internal control deficiency?An internal control deficiency or combination
of deficiencies that is severe enough to adversely affect the likelihood that the
entity can achieve its objectives is referred to as a “major deficiency”. - 18What are benefits of internal control?Internal control provides many benefits to an entity. It provides management and board
of directors with added confidence regarding the achievement of objectives, it provides
feedback on how a business is functioning, and it helps to reduce surprises. Among the
most significant benefits of effective internal control for many entities is the ability to
meet certain requirements to access capital markets, providing capital-driven innovation
and economic growth. - 19Give another examples of internal control.Reliable reporting that supports management and board decision making on
matters such as product pricing, capital investment, and resource deployment
•• Consistent mechanisms for processing transactions, supporting quality of
information and communications across an organization, enhancing speed
and reliability at which transactions are initiated and settled, and providing
reliable recordkeeping and ongoing integrity of data;
Increased efficiency within functions and processes - 20What are 5 components of internal control?Control Environment
•• Risk Assessment
•• Control Activities
•• Information and Communication
•• Monitoring Activities - 21Explain reportign objectivesReporting objectives pertain to the preparation of reports for use by organizations and stakeholders
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- Business/Economics Flashcards on COSO Chapter 1-4, created by Archimed Nemes on 29/09/2017.
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