MGA 311 Chapter Notes - Chapter 6: Public Company Accounting Oversight Board, Foreign Corrupt Practices Act, Internal Control
19 Dec 2016
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Chapter 6 Internal Control and Risk Assessment
⚫ Internal control
-a process designed to provide
reasonable assurance
that organizational objectives related to the
reliability of both internal and external reporting, the effectiveness and efficiency of operations
and compliance with applicable laws and regulations will be achieved
-ongoing process, its
effectiveness
is a state or condition at a point in time; depends on:
- ’
-an understanding by employees of their roles and the vital contributions they make
➢ Stakeholders’ I
Stakeholders’ (shareholders, customers, suppliers, employees, creditors): depend on the accuracy
of issued financial information for decision making; concerned about the failure of external
auditors to detect management wrongdoing
➢ Legislator’ I
Securities and Exchange Commission (SEC): management may be fined/imprisoned, if the
company intentionally fails to comply with the requirement to have adequate internal control
-legal liability stems from the
Foreign Corrupt Practices Act
(FCPA)
FCPA: response to allegations of corporate wrongdoing
1 ,
political contributions
2. the payment of bribes to foreign officials to secure export sales
FCPA: 1. Established criminal liability for bribery of foreign officials by any US company
2. Established provisions for record keeping and internal control for all companies registered
with the SEC
G : ’ , and recorded
assets are compared with existing assets at reasonable intervals to check for inconsistencies
Sarbanes-Oxley Act of 2002:
reliability) of corporate disclosures issued by publicly-held companies after financial disasters such
as the Enron debacle
Public Company Accounting Oversight Board (PCAOB): issue auditing standards, oversee quality
control and set independence standards
➢ External A’ I
-comply with SAS and PCAOB Auditing Standards; report assertions about internal control
- , ’
testing the according record
-if control is effective, auditors can place some degree of reliance on it and correspondingly
reduce the level of required testing
➢ Professional O’ I
The first Committee of Sponsoring Organizations (COSO) internal control report was a result of
the efforts of the National Commission on Fraudulent Financial Reporting (Treadway Commission)
-in response to the rash of fraudulent financial reporting
-developed a common definition and framework of internal control that culminated with the
issuance of Internal Control
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Document Summary
A process designed to provide reasonable assurance that organizational objectives related to the reliability of both internal and external reporting, the effectiveness and efficiency of operations and compliance with applicable laws and regulations will be achieved. Ongoing process, its effectiveness is a state or condition at a point in time; depends on: (cid:28668)(cid:28679)(cid:28678) (cid:28661)(cid:28664)(cid:28668)(cid:28673)(cid:28666) (cid:28661)(cid:28680)(cid:28668)(cid:28671)(cid:28679) (cid:28668)(cid:28673)(cid:28679)(cid:28674) (cid:28679)(cid:28667)(cid:28664) (cid:28681)(cid:28664)(cid:28677)(cid:28684) (cid:28665)(cid:28660)(cid:28661)(cid:28677)(cid:28668)(cid:28662) (cid:28674)(cid:28665) (cid:28660)(cid:28673) (cid:28674)(cid:28677)(cid:28666)(cid:28660)(cid:28673)(cid:28668)(cid:28685)(cid:28660)(cid:28679)(cid:28668)(cid:28674)(cid:28673)"(cid:28678) (cid:28662)(cid:28680)(cid:28671)(cid:28679)(cid:28680)(cid:28677)(cid:28664) (cid:28660)(cid:28673)(cid:28663) (cid:28660)(cid:28662)(cid:28679)(cid:28668)(cid:28681)(cid:28668)(cid:28679)(cid:28668)(cid:28664)(cid:28678) An understanding by employees of their roles and the vital contributions they make. Stakeholders" (shareholders, customers, suppliers, employees, creditors): depend on the accuracy of issued financial information for decision making; concerned about the failure of external auditors to detect management wrongdoing. Securities and exchange commission (sec): management may be fined/imprisoned, if the company intentionally fails to comply with the requirement to have adequate internal control. Legal liability stems from the foreign corrupt practices act (fcpa)
