Coso s Internal Control
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Transcript of Coso s Internal Control
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Internal ControlIntegrated Framework
An Overview..
Prepared by Wael F. Bibi ,JCPA,CPA,CIA
Bibi Consulting,Inc.
COSOs
Source: COSOs Internal Control Integrated framework
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What is COSO?
Who are the sponsors?
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What Is Internal Control ?
A process effected by an entitys board ofdirectors,management and other
personnel,designed to provide reasonable
assurance regarding the achievements of
objectives in the following categories:
j Effectiveness & efficiency of operations.
j Reliability of financial reporting.
j Compliance with applicable laws and regulations.
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j Internal control is aprocess. It is a means
to an end, not an end in itself.j Internal control is effected bypeople. Its
not merely policy manuals and forms, butpeople at every level of an organization.
j Internal control can be expected toprovide only reasonable assurance, notabsolute assurance, to an entitysmanagement and board.
j Internal control is geared to theachievement ofobjectives in one or moreseparate but overlapping categories.
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Components Of Internal Control
jControl Environment.
jRisk Assessment.
jControl Activities.j Information & Communication.
jMonitoring.
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Control Environment
j Sets the tone of the organization.
j The foundation for all other components.
j It includes the integrity,ethical values and competence of
the people.j Reflects: managements philosophy & operating style,the
way management assigns authority and responsibility and
organizes and develops its people, and the attention and
direction provided by the board of directors.
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Risk Assessment
jEvery entity faces internal &external risks.
jEvery entity sets objectives.
jRisk assessment is the identification andanalysis of relevant risks to achievements of
the objectives.
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Control Activities
j The policies and procedures that help ensure
management directives are carried out.
j They help ensure that necessary actions are taken
to address risks.
j Control activities occur throughout the entity at all
levels and in all functions.
j They include activities such as approvals ,authorization,reconciliations and segregation of
duties.
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Information & Communication
j Relevant information must be identified , capturedand communicated in a form & timeframe thatenables people to carry out their responsibilities.
j Information systems produce reports containingoperational,financial and compliance relatedinformation that make it possible to run and
control the business.
j Effective communication must occur in a broadersense,flowing down,across and up theorganization.
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Monitoring
j Internal control systems need to be monitored.
j Types of monitoring:
- ongoing during the course of operations.
- evaluation for which the scope and frequency will
depend primarily on an assessment of risks and the
effectiveness of ongoing monitoring procedures.
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Responsibilities
Who is responsible for internal control ?
Everyone !
Board of Directors :Governance,guidance & oversight
Management : CEO is the owner
Internal Auditors: evaluate & monitor
Other personnel :information and communication
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What Internal Control Can Do
j It can help achieve performance & profitability
targets.
j It can help prevent loss of resources.
j It can help ensure reliable financial reporting.
j It can help ensure compliance with laws.
It can help an entity get to where it wants togo,and avoid pitfalls and surprises along the
way.
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What Internal Control Cannot Do
j It cannot ensure success.
j It cannot ensure the reliability of financial
reporting.
j It cannot ensure compliance with laws and
regulations.
Internal controls ,no matter how well designed and
operated,can provide only reasonable assurance tomanagement regarding achievements of an
entitys objectives.
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Limitations of Internal Control
j Judgement.
jBreakdowns.
jManagement override.jCollusion.
jCosts Versus Benefits.