Accounting Information Systems 13th Edition: Chapter 7

Interactive control system - answer-helps managers to focus subordinates' attention on key strategic issues and to be more involved in their decisions. are interpreted and discussed in face to face meetings of superiors, subordinates, and peers. Foreign Corrupt Practices Act (FCPA) - answer-Prevent companies from bribing foreign officials to obtain business. Sarbanes-Oxley Act (SOX) - answer-Applies to publicly held companies and their auditors and was designed to prevent financial statement fraud, make financial reports more transparent, protect investors, strengthen internal controls, and punish executives who perpetrate fraud. Public Company Accounting Oversight Board (PCAOB) - answer-control the auditing profession. Sets and enforces auditing, quality control, ethics, independence, and other auditing standards. It consists of 5 people who are appointed by the SEC. Control Objectives for Information and Related Technology (COBIT) - answer-consolidates control standards from many different sources into a single framework that allows: 1) Management to benchmark security and control practices of IT environments. 2) users to be assured and adequate IT security and controls exist 3)auditors to substantiate their internal control opinions and to advise IT security and control matters. COBIT 5 framework - answer-1. Meeting stakeholder needs 2. Covering the enterprise end to end ing a single, integrated framework 4. enabling a holistic approach ating governance from management Committee of Sponsoring Organization (COSO) - answer-consists of the AICPA, the institute of internal auditors, the institute of MGMT accountants, and the financial exec institute Internal Control-Integrated Framework (IC) - answer-widely accepted as the authority on internal controls and is incorporated into policies, rules, and regulations used to control business activities. Enterprise Risk Management- Integrated Framework (ERM) - answer-the process the board of directors and management use to set strategy, identify events that may affect the entity. Assess and manage risk, and provide reasonable assurance that the company achieves its objectives and goals. Principals of ERM - answer--Companies are formed to create value for their owners -mgmt must decide how much uncertainty it will accept as it creates value -uncertainty results in risk uncertainty results in opportunity the ERM framework can manage uncertainty as well as create and preserve value Internal Environment - answer-influences how organizations establish strategies and objectives: structure business activities; and identify. assess, and respond to risk. It's the foundation of ERM components. A weak internal environment often results in breakdowns in risk management and control What makes up the Internal Environment? - 's philosophy, operating cycle style, and risk appetite tment to integrity, ethical values, and competence nal control oversight by the board of directors izational structure ds of assigning authority and responsibility 6. Human resource standards that attract, develop, and retain competent individuals 7. Human influences Risk Appetite - answer-the amount of risk companies are willing to accept to achieve their goals. Audit Committee - answer-responsibility for financial reporting, regulatory compliance, internal control, and hiring and overseeing internal and external auditors, who report all critical accounting policies and practices to them. Policy and procedures manual - answer-explains proper business practices, describes needed knowledge and experience, explains document procedures, explains how to handle transactions, and lists the resources provided to carry out specific duties. It includes a chart of accounts and copies of forms and documents. Background Checks - answer-talking to references, checking for criminal record, examining credit records, and verifying education and work experience. Strategic objectives - answer-high level goals that are aligned with the company's mission, support it, and create shareholder value, are set first Operations objectives - answer-deal with the effectiveness and efficiency of company operations, determine how to allocate resources. They reflect management preferences, judgments and style and are a key factor in corporate success