BEC CPA Exam Chapter 1

BEC CPA Exam Chapter 1 Committee of Sponsoring organizations - ANSWER-- Independent private sector created in the mid 1980's to study the factors that led to fraulent financial reporting Internal Control - Integrated Framework - ANSWER--Used by a company's management and BOD to obtain initial understanding of what constitutes on effective IC - Provides confidence to external stakeholders - Principles based approach ( not black and white) - eveolved into 17 principles that are categorized into 5 major internal control components Application to Management and Board - ANSWER-Assists management and BOD in the following: -effectively applying IC to the overall organization -determining the requirements of an effective IC system -Identifying and analyzing risks - extending IC applications beyond the financial reporting Application to stakeholders - ANSWER--Provides greater understanding of what constitutes an effective IC -greater confidence in management and BOD has effective oversight - Internal Control Framework Objectives (ORC) - ANSWER-1. Operations Objectives: relates to the effectiveness and efficiency of operations 2. Reporting Objectives: pertains to the reliability, timeliness, and transparency of an entity's external/ internal financial/ nonfinancial reporting established by regulators 3. Compliance Objectives: ensure the entity is adhering to all applicable laws and regulations Components of IC (CRIME) - ANSWER-- Applies to all 3 ORC Objectives