AFSMAIS_07.pptVIP

Design and Use of Documents and Records Proper design and use of documents and records helps ensure accurate and complete recording of all relevant transaction data. Form and content should be kept as simple as possible Documents should be sequentially pre-numbered Safeguard Assets, Records, and Data People most often think of cash and physical assets, such as inventory and equipment. Another company asset that needs to be protected is information. Employees pose a much greater risk than outsider when it comes to loss of data. It is also important to maintain accurate records of all assets: Periodically reconcile recorded amounts to physical counts. Restrict access to assets Protect records and documents Independent checks on performance Let’s look at Bill and Mary again. Assume that Bill stole cash but Mary did NOT alter the books. Can Bill’s theft be discovered if an independent party doesn’t compare a count of the cash to what’s recorded on the books? Ledger $1,000 Independent checks on performance Segregation of duties only has value when supplemented by independent checks on performance. Following are examples of independent checks: Top-level reviews Analytical reviews Comparison of actual quantities with recorded amounts Independent review Now we have finished all the Control Activities and will talk about Risk Assessment in the COSO model RISK ASSESSMENT APPROACH TO DESIGNING INTERNAL CONTROLS Identify the events or threats that confront the company Estimate the likelihood or probability of each event occurring Estimate the impact of potential loss from each threat Identify set of controls to guard against threat Estimate costs and benefits from instituting controls Reduce risk by implementing set of controls to guard against threat Is it cost-beneficial to protect system Avoid, share, or accept risk Yes No Estimate Cost and Benefits No internal control system can provide foolproof protection against all internal control threats. The cost of a foolpro