Chapter 13 Accounting Information Systems and Internal Controls

Chapter 13 Accounting Information Systems and Internal Controls

1. Sarbanes-Oxley Act of 2002

   • S O X requires public companies registered with the S E C and their auditors to annually assess and report on the design and effectiveness of internal control over financial reporting.
   • Established the Public Company Accounting Oversight Board (P C A O B) to provide independent oversight of public accounting firms.
   • P C A O B Auditing Standard No. 5 (AS 5) encourages auditors to use a risk-based, top-down approach to identify the key controls.

2. Corporate Governance

   • Promotes accountability, fairness, and transparency in the organization’s relationship with its stakeholders.
   • A set of processes and policies in managing an organization with sound ethics, internal and external control mechanisms to safeguard the interests of its stakeholders.

3. Control Frameworks

   • C O B I T • Control Objectives for Information & related Technology. • For the governance and management of enterprise I T.
   • C O S O E R M Framework • Expands C O S O framework taking a risk-based approach.
   • COSO Internal Control Framework • For evaluating, reporting, and improving internal control, widely accepted.

4. Overview of Control Concepts 2

   • Detective controls discover problems that are not prevented (Bank reconciliations and monthly trial balances).
   • Corrective controls correct and recover from the problems that have been identified (Backup files to recover corrupted data).
   • Preventive controls deter problems from occurring (Authorization).