11/26/2019 Internal Control | CMA Lessons

Internal Control
Internal Control
1- Internal Control Definition: According to COSO
A process, affected by:
1. Board of Directors
2. Management
3. Personnels
Designed to provide reasonable assurance that organizatonal objectives will be achieved in the following categories:
1. Reliability of Financial Statements
2. Effectiveness and efficiency of operations
3. Compliance with applicable laws and regulations

2- Components:
1- Control Environment
Set the tone at the top
Board of director's, and upper management, attitude and actions regarding the significance of control
include the following Components:
1. Organizational Structure
2. Management Philosophey
3. Assingning Authorities and Responsibilities
4. Objectives and goals
5. Policies and procedures

2- Risk Assessment
1) Risk Definition:
Unforseen obstecles that pursuit organizational objectives
2) Risk Assessment
Management Identify organizational vulnearability
3) Risk Management:
the ongoing process of designing and operating internal controls system
that mitigate risks
identified in risk assessment

3- Control Activities
Activities designed to provide reasonable assurance that
Management directives are being excuted
control procedures include
1. Segregation of duties
Assigning different employees to perform functions such that
employee acting alone is preventive of
committing and error or concealing a fraud
in his normal course of duity

2. Independant checks and verification

3. Pre-numbered forms
4. Specific document flows
5. Safeguarding controls

4- Information and communication

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11/26/2019 Internal Control | CMA Lessons

Information:
Support the identification, capture and exchange of information
in a form and time frame that
enable people to carry out their responsibilities

Communication:
Providing an understanding to employees about their roles and responsibilities
5- Monitoring
A process that assess the quality of internal control performance over time

Regulation, Laws
1- Foreign Corrupt Practices Act
Desinged to prevent secret payments
of corporate funds
for purposes contrary of public policy

Contains the following provisions

1. Anti-Bribery Provisions
2. Accounting Provisions

2- Sarbanes-Oxlely Act
Contains the following provisions
Section 302: Corporate Responsibilities of Financial Reporting
Section 404: Management Assessmet of internal control
3- PCAOB
Standard No.2. Standards for practice of auditing
Standard No.5. Principles based

Responsibilities
1- Board of Directors
1. Select and Remove officers
2. Compensate Officers and management
3. Determine Capital Structure
4. Initiate Fundamental changes
5. Declare Dividends
6. Add, Amend, and Appeal Bylaws

2- Audit Committee

3- External Auditor

4- Human Resources

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