Chapter 3 - Internal controls. When you've finished studying this chapter, and completing the activities at its conclusion, you should be able to: Define internal control and explain its importance in the accounting information system, explain the basic purposes of internal control and its relationship to risk, describe and give examples of various kinds of risk exposures,. | Chapter 3 Internal Controls Outline Learning objectives Internal control definition Internal control purposes Risk exposures Risk / control matrix COSO framework Learning objectives Define internal control and explain its importance in the accounting information system. Explain the basic purposes of internal control and its relationship to risk. Describe and give examples of various kinds of risk exposures. Learning objectives Prepare a simple risk/control matrix. Summarize and explain the importance of COSO’s 2013 “Internal Control—Integrated Framework.” Critique existing internal control systems and design effective internal controls. Internal control definition 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. From COSO’s 2013 Internal Control Integrated Framework Internal control definition Key elements of the definition Process. Internal control is not a list of rules or “boxes to check off.” Effected by [various groups]. Internal control is the responsibility of the whole organization—not just the accounting function. Internal control definition Key elements of the definition Reasonable assurance. No internal control ever provides absolute assurance. The benefits of a control must outweigh its costs. Objectives relating to: Operations: business processes, such as the sales / collection process. Reporting: financial, tax, internal. Compliance: applicable laws & regulations, such as SOX and the Foreign Corrupt Practices Act. Internal control purposes Safeguard assets, such as by depositing cash daily in the bank. Ensure reliable financial reporting, such as through financial statement audits. Internal control purposes Promote operating efficiency, such as with a procedures manual. Encourage compliance with management directives, such as by appropriate training & performance reviews. Risk . | Chapter 3 Internal Controls Outline Learning objectives Internal control definition Internal control purposes Risk exposures Risk / control matrix COSO framework Learning objectives Define internal control and explain its importance in the accounting information system. Explain the basic purposes of internal control and its relationship to risk. Describe and give examples of various kinds of risk exposures. Learning objectives Prepare a simple risk/control matrix. Summarize and explain the importance of COSO’s 2013 “Internal Control—Integrated Framework.” Critique existing internal control systems and design effective internal controls. Internal control definition 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. From COSO’s 2013 Internal Control Integrated Framework Internal control definition Key elements of the .
