Flashcards
Chapter 5 Documenting and evaluating internal control
Cards in this deck (23)
- 1What is normative and analytical documentation?• Normative Documentation: presribes what the internal control system should be like
• Analytical Documentation: reflects actual state of the internal control system - 2Why do organisations prepare documentation?1. to improve their information system
2. to increase the efficiency and effectiveness of operations
3. to achieve strategic gains
4. to meet regulatory demands (e.g. SOX Act) - 3Why compare normative to analytical documentation?By comparing a normative to an analytical documentation one can identify shortcomings of an existing system.
- 4What are options in documenting internal control systems?Narrative descriptions
o Graphic documentation
Diagrams
Flowcharts - 5What are advantages of graphic documentation of internal control?• Higher Information density – One can see a certain process are a single glance
• Univocal Representations of relationships between processes and procedures.
• Consistency requirements
o If two diagrams or flowcharts are not aligned, a graphical documentation will identify this
• Ease of maintenance - 6What are two techniques available for graphic internal control description?Data flow diagram and system flowshcarts.
- 7What are components of data flow diagram?• Organizational entities or data-processing activities (e.g. Sales department)
• Data flows between those entities or activities (e.g. Receipt)
• Sources, Destinations and storage of data (e.g. Client, bank, sales journal) - 8What is difference between logical and physical data flow diagrans?Logical data flow diagrams visualize what activities are performed in the information system in a certain process, Physical data flow: how, where and by whom the activities are performed
- 9What is difference between logical and physical data flow diagrams in terms of IT?In the integral control framework logical data flow diagrams are part of inforamtion and communication domain and physical data flow diagrams are part of IT domain.
- 10Describe context diagrams.has the least level of detail:
• Combines organizational unit and data processing activities into processes and positions, the sources of and destinations for the data - 11Explain systems flowcharts.Incorporates the business, information and communication and the IT domain and thus helps to show a comprehensive picture of a certain business process. Helps to understand:
• Data Flows
• IT that is used
• Actual operations of that process - 12In what categories control checklists are applied?1. Segregation of Duties between the departments involved in the process
2. Independent recording of process transactions in the general ledger by the accounting department
3. Independent reconciliations by the controller or the head of the accounting department
4. Process controls and procedures
5. Technology-related controls - 13How normative internal constrol system should be described?1. Determine the typology of the org.
2. Identify specific risks for the org.
3. Dscuss the administrative and org. conditions
4. Describe the intrenal controls
5. Discuss information requirement of management - 14What are categories of administrative and organizational conditions?1. Computer security
2. Segregation of duties
3. Budgets and budgeting procedures
4. Guidelines issued by management - 15What are categories of computer security measures?i. IT Organization
ii. Prevent unauthorized modification or use of files and programs
iii. Ensure the continuity of business operations
iv. Program management - 16What must be discussed under segregation of duties?i. Segregation between: authorization, custody, recording, execution and checking
ii. Assumptions made if there is not enough information about segregation in the organization at hand - 17How should segregation of duties be described?Which officer is assigned to which tasks, and what segregated duty is involved.
- 18What should description of budgets include?A description of functional budgets such as (purchasing, sales, investment, production and HR)
- 19What are management guidelines?They are used to delegate tasks to lower levels and mandate the effected officers to make certain decisions independently.
- 20What can you tell about internal control measures?• Internal control solutions should be provided for every risk identified
• Most common structure is a description per process
o Starting with sales, ending with purchases - 21What is minimum discussion requirement for internal control measures?o Duties that are to be segregated
o Appropriate reconciliation
o Necessary procedures
o Data collections to be used - 22What is internal control manual?Provides a description of the organization as it is and the internal control system as it
should be - 23What are components of internal control manual?Introduction
o A description of the organization
o Risks for the organization with respect to information provision
o Impact and likelihood of certain risks
o A description of the internal controls per process
o The information that is available
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- Business/Economics Flashcards on Chapter 5 Documenting and evaluating internal control, created by Archimed Nemes on 06/10/2017.
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- Archimed Nemes
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