49 terms

Accy 304 Pre-midterm

STUDY
PLAY
what is a firm
a nexus of contracts both implicit and explicit
incentive misalignment
conflict of interests
Information asymmetry
Between a principle and their agent
5 typical agency problems in the firm
choice of efforts
perquisite taking
risk averse behavior
horizon issue
overinvestment
agency costs
costs incurred due to agency problems
information asymmetry
adverse selection
moral hazard
Adverse selection
pre-contractual abuse of private information; hidden information problem
Moral hazard
post-contractual noncompliance: hidden effort problem
4 levers of control
belief systems
boundary systems
diagnostic control
interactive control
diagnostic control
check critical performance variables to encourage eventual achievement
Belief systems
emphasize the core values to promote contributions
boundary systems
set ethical and strategic boundaries against risks to be avoided
ethical boundary
compliance of laws/rules; emphasis on code of ethics/conduct or confidentiality; set the proper tone: Must clearly communicate the boundaries
strategic boundary
- steer the firm's on where they should focus on; be clear about what not to pursue among choices.
interactive control
monitor strategic uncertainties to create paths-to-go
fraud triangle
incentive-opportunity-rationalization
COSO framework
control environment
risk assessment
control activities
information and communication
monitory activities
control activities
-authorization
-segregation of duties
-adequate records and documents
-security of assets and documents
-independent check and reconciliation
-cost-benefit consideration
control environment
sets the tone for the organization, influencing the control consciousness of people
risk assessment
identification and analysis of relevant risks to achievement of the objectives.
information and communication
- uses relevant information; communicates internally; communicates externally
monitoring activities
process of assessment by appropriate personnel of the design and operation of controls on a suitably timely basis to eventually take necessary actions
authorization
specific individuals should have authoritative responsibility for certain tasks. Only those designated employees should perform these authorization functions.
segregation of duties
authorization-recording-custody
adequate records and documents
those responsible for recording transactions should ensure that supporting documentation is retained an organized.
security of assets and documents
those responsible for recording transactions should ensure that supporting documentation is retained an organized.
independent check and reconciliation
- both are used to examine whether the transaction was recorded accurately or whether a transaction was omitted.
cost-benefit consideration
- both are used to examine whether the transaction was recorded accurately or whether a transaction was omitted.
Trust service principles
security
availability
processing integrity
online privacy
confidentiality
security
unauthorized access (physical and logical)
availability
system failure due to hardware or software problems (system down/outage)
processing integrity
inaccurate, incomplete, or improperly authorized information
online privacy
personal information about customers may be accessed by those inside or outside the company and be misused
confidentiality
any information designated as confidential about the company or its business partners may be subject to unauthorized access during its transmission or storage in the IT system.
General controls
-authentication of users and limiting unauthorized access
-preventing hacking and other network break-ins
- firms with extensive IT operations have an IT governance committee in the management team
- physical environment and physical security to limit access to H/W and S/W and prevent vandalism and other disruptions
- business continuity planning
application controls
input controls
processing controls
output controls
input controls
to ensure the accuracy and completeness of data input procedures
processing controls
to prevent, detect, and correct errors that can occur during the processing in an application
output controls
to ensure accuracy and completeness of the output; to properly safeguard the outputs for security and confidentiality
business process
a prescribed sequence of work steps completed in order to produce a desired result for the organization
risks in a business process
validity
accuracy
completeness
classification
timeliness
aggregation
validity
only valid transactions should be recorded
accuracy
transactions should be recorded in the correct amount
completeness
all the valid transactions should be recorded
classification
transactions must be recorded in the correct customer account
timeliness
transactions should be recorded in a timely manner
aggregation
transactions must be accumulated or transferred to the accounting system correctly
3 main processes in the revenue cycle
sales order processing
sales return
cash collection
3 main processes in the purchasing cycle
purchase process
purchase return
cash disbursement
YOU MIGHT ALSO LIKE...