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Chapter 7 Control and Accounting Information Systems, Functions …

- - - - internal controls - the processes and procedures implemented to provide reasonable assurance that control objectives are met
- - - - Public Company Accounting Oversight Board (PCAOB)- a broad created by SOX that regulates the auditing a profession; created as part of SOX
      - important aspects
        
        Public Company Accounting Oversight Board (PCAOB)
        
        New rules for auditors
        
        New roles for audit committees
        
        New rules for management
        
        New internal controls requirements
- - - - Domain of 32 management processes
        
        Align, plan and organize (APO)
        
        Build, acquire and implement (BAI)
        
        Deliver, service, and support (DSS)
        
        Monitor, evaluate and assess (MEA)
    - - Build, acquire and implement (BAI)
      - Deliver, service, and support (DSS)
      - Monitor, evaluate and assess (MEA)
      - Align, plan and organize (APO)
  - - - Internal Control - Integrated Framework (IC)
        -A COSO framework that defines internal controls and provides guidance for evaluating and enhancing internal control systems
- - - - risk appetite - the amount of risk a company is willing to accept to achieve its goal and objectives. To avoid undue risk, risk appetite must be in alignment with company strategy
    - - companies endorse integrity by:
        
        actively teaching and requiring it
        
        avoiding unrealistic expectations or incentives that motivate dishonest or illegal acts
        
        consistently rewarding honesty and giving verbal labels to honest and dishonest behavior
        
        developing a written code of conduct that describes honest and dishonest behaviors
        
        requiring employees to report dishonest or illegal acts and disciplining employees who knowingly fail to report them
        
        making a commitment to competence
    - - audit committee- the outside independent board of director members responsible for the financial reporting, regulatory compliance, internal control, and hiring and overseeing internal and external auditors
    - - important aspects:
        
        centralization or decentralization of authority
        
        a direct or matrix reporting relationship
        
        organization by industry, product line, location, or marketing network
        
        how allocation of responsibility affects information requirements
        
        organizations of and lines of authority for accounting, auditing, and information system functions
        
        size and nature of company activities
    - - policy and procedures manual- a document that explains proper business practices, describes needed knowledge and experience, explains how to handle transactions, and lists the resources provided to carry out specifics duties
    - - hiring
        
        compensating, evaluating and promoting
        
        training
        
        managing disgruntled employees
        
        confidentiality agreement and fidelity bond insurance
        
        discharging
        
        vacations and rotation of duties
        
        prosecute and incarcerate perpetrators
        
        frauds are not reported:
        
        can be public relations disasters, reveal system vulnerabilities, attract hackers
        
        law enforcement and the courts are busy with violent crimes
        
        difficult, costly, time-consuming to investigate
        
        many law enforcement officials, lawyers, judges lack computer skills
        
        fraud sentences are often light
        
        background check- an investigation of a prospective or current employee that involves verifying their educational and work experience, talking to references, checking for a criminal record or credit problems, and examining other publicly available information
- - - - operations objectives- objectives that deal with the effectiveness and efficiency of company operations and determine how to allocate resources
        
        reporting objectives- objectives to hep ensure the accuracy, completeness and reliability of company reports; improve decision making; and monitor company activities and performance
        
        compliance objectives- objectives to help the company comply with all applicable laws and regulations
- - - - Estimate costs and benefits
        
        expected loss- the mathematical product of the potential dollar loss that would occur should a threat become a reality (called impact or exposure) and the risk or probability that the threat will occur (called likelihood)
        
        Determine cost/ benefit effectiveness
        
        implement control or accept, share or avoid the risk
- - - - authorization - establishing policies for employees to follow and then empowering them to perform certain organizational functions. Authorizations are often documented by signing, initializing code on a document or record
      - specific authorization- the authorization given employees to handle routine transactions without special approval
        
        general authorization- the authorization given employees to handle routine transactions without special approval
  - - - segregation of systems duties- implementing control procedures to clearly divide authority and responsibility within the information system function
        
        system administration make sure all info system components operate smoothly and efficiently
        
        network management ensures that devices are linked to the organization's internal and externa networks and that those networks operate properly
        
        security management makes sure that systems are secure and protected from internal and external threats
        
        change management is the process of making sure changes are made smoothly and efficiently and do not negatively affect systems reliability, security, confidentially, integrity, availability
        
        users record transaction, authorize data to be processed and use system output
        
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  - - - strategic master plan a multiple-year plan of the projects the company must complete to achieve its long-range goals
        
        steering committee - an executive-level committee to plan and oversee the info systems function
      - project milestones points where progress is reviewed and actual and estimated completion times are compared
        
        data processing schedule- schedule that shows when each data processing task should be performed
        
        system performance measurements ways to evaluate and assess a system
    - - utilization the percentage of time a system is used
        
        response time - how long it takes for a system to respond
        
        postimplementation review - review, performed after a new system has been operating for a brief period, to ensure that it meets its planned objectives
        
        system integrator - an outside party hired to manage a company's systems development effort
- - - - implement effective supervision
        
        use responsibility accounting systems
        
        monitor systems activities
        
        track purchased software and mobile devices
        
        conduct periodic audits
        
        employ a computer officer and chief compliance officers
        
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