...embezzlement of a company’s assets by an owner, manager, or employee of the company. Fraudulent financial reporting occurs by intentionally misstating or omitting important items from the financial statements. Financial reporting fraud is what occurred in the Cendant case. CUC’s management inflated earnings by recording fictitious revenue or reduced expenses in order to meet earnings expectations. c. One factor the auditors should consider when assessing the likelihood of fraud is whether the corporation has any incentives or pressures to commit the fraud. In order to have the opportunity to merge or acquire other companies, CUC needed to meet their earnings expectations. This could have been a sign to the auditor’s that CUC had a reason to inflate their revenues. Another factor to consider is whether there are opportunities to commit a fraud. CUC made various year-end adjustments to their general ledger. This allowed CUC opportunities to fraudulently adjust their general ledger through various techniques. Auditors should also consider if there are any rationalizations available to the company to justify committing a fraud. It was noted in the case that senior management created an environment that suggested inaccurate financial reporting was...
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...CONTROL AND AIS (Version 1 – Brief, just for the exam) Overview of Control Concepts * Internal Control - plan of organization and the methods a business uses to safeguard assets, provide accurate and reliable information, promote and improve operational efficiency and encourage adherence to prescribed management procedures. * Management Control - broader than internal control 1. Integral part of management responsibilities. 2. Is designed to reduce errors and irregularities and achieve goals 3. Is personnel oriented and seeks to help employees attain company goals by following policies. * Administrative Controls - help ensure operational efficiency and adherence to managerial policies. * Accounting controls - safeguard assets and ensure the reliability of accounting records. * Internal control structure - policies and procedures established to provide reasonable assurance that the organization's specific objectives will be achieved. 1. Control environment 2. Accounting system 3. Control procedures * Internal control classifications 1. Preventive, detective, corrective 2. Feedback, feedforward 3. General, application 4. Input, processing and output COSO - Committee of Sponsoring Organizations * Internal control - process implemented by management, the BOD, and those under their direction to provide reasonable assurance that control objectives are achieved with regard to: ...
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...Management Accounting Environment Introduction Every organization small, medium and large needs someone to be in charge of day to day activities that is going to be responsible for decision making, planning, controlling, directing personnel, outlining organization structure and will be responsible for taking strategies in competitive advantages. In today’s business environment, corporate organizations need to take every advantage they can to remain competitive due to highly increasing competition in the market, i.e. electronics commerce ( e-commerce) and introduction of new technology day by day. Customers need specialized products and service and accurate information convening product they are purchasing, product availability, order status, delivering time. Shareholders expect greater value from their investment and accurate information of the financial status of the company. This new competitive environment requires companies ability to create value for their customers and to differentiate themselves from their competitors through the formulation of clear business strategy. In today's business environment, knowledge is power so business strategy must be supported by appropriate organizational factors such as accounting information systems, organizational design and effective manufacturing process Management Accounting deals with provision of information inside the company - that is, the process of identifying, measuring and forecasting, analyzing, interpreting...
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...Evaluating Internal Controls Lisa Cook ACC 544 October 31, 2011 Bret Mann Checklist for Evaluating Internal Controls Internal Control is to assist companies with reviewing and assessing its accountability within the organization. Internal controls are best practices for an organization that sets the tone and its main purpose is reducing business risk by controlling loss because of the misuse of the company’s assets. Fraud is sure to be detected through internal controls as well as help with the accuracy of its financial reporting. This analysis will provide a comprehensive checklist for evaluating internal controls and show how to apply the checklist to outline phases of the control evaluation. Evaluating Internal Controls Checklists The Committee of Sponsoring Organization (COSO) defines controls as the “process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following three categories: * Reliability of financial reporting. * Effectiveness and efficiency of operations. * Compliance with applicable laws and regulations. Internal control is designed to achieve objectives in various categories” (Louwers, et al, 2007, p. 149). The purpose for an internal control checklist is to analyze the efficiency of the organization’s controls in place, document the controls, and make recommendations and necessary improvements. Management is the responsibility...
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...CHAPTER 1 1. DEFINITION INTERNAL CONTROL is a process effected by people at every level of an organization, designed to provide reasonable assurance about the achievement of objectives in the – effectiveness and efficiency of operations, - reliability of financial reporting, - compliance with applicable laws and regulations. A PROCESS: it is a multiplicity of processes, a series of actions, that is integrated with the basic management processes of planning, executing and monitoring in order to enable their function and in order to monitor them. It is not added on to an entity’s activity, but it should rather be “built-in” in order to be most effective. It is also critical to the success of quality programmes and to cost containment and response time (i.e. not adding new procedures but focusing on existing one and building internal control into them). PEOPLE: internal control is effected by the BoD, management and other personnel. People establish objectives, responsibilities, limits of authority and then put control mechanisms in place. Internal control recognizes that every individual brings in different abilities, needs, priorities, which affect internal control and are in turn affected by internal control itself. The BoD does not only oversee, but it also provides directions and approves transactions and policies, so it is an important element of internal control. REASONABLE ASSURANCE: internal control does not provide absolute assurance. Limitations regard faults in human...
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...INTERNAL CONTROLS RUTASHA BRABHAM 1XACC/280 AUGUST 7, 2011 Internal controls are beneficial to a company’s structure and organizational design. Internal controls consists of all the measures taken by the organization for the purpose of; (1) protecting its resources against waste, fraud, and inefficiency; (2) ensuring accuracy and reliability in accounting and operating data; (3) securing compliance with the policies of the organization; and (4) evaluating the level of performance in all organizational units of the organization (internal controls are simply good business practices (Internal Audits, n.d.). There are five components of internal controls. Control environment, risk assessment, control activities, information and communication, and monitoring are the five components of internal controls. The control environment is connected to the outline of the company. The control environment involves the integrity, ethical values, the company’s philosophy, and the competence of the entity’s people (US Regents, 2011). The control environment provides the structure for a company’s policies and values for their day to day activities. Control environment factors include integrity and ethical values, the commitment to competence, leadership philosophy and operating style, the way management assigns authority and responsibility, and organizes and develops its people, and policies and procedures (US Regents, 2011). Risk assessment is a step in a risk management procedure...
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...impact to the corporate image. Nowadays, codes of conduct are being rapidly adopted in the organization all around the world. The effects of codes of conduct on employee’s perceptions and behavior have been thoroughly addressed. According to Jill(2013), the Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations (COSO) in 1992, defined Internal control into five elements: control environment, risk assessment, control activities, information and communication, and monitoring. In this five elements, the control environment is the most critical, but also the most difficult to effectively manage and evaluation. The COSO framework also points out that the control environment could help the organization to set the acting style and work atmosphere in order to motivate employees to form a line with the overall characteristics of the enterprise control consciousness. This kind of control environment is organization codes of conduct. In an effective code of conduct, employees are very clear what behavior is compliance, which behavior would be affirmative by the leadership. However, in the weak control environment, employees tend to ignore and often in violation of the provisions of the control program, and these acts provides opportunities in fraud of accounting statements and career (Jill,...
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...Monday 26/06/2012, Tuesday 27/06/2012, Wednesday I Sem. 9.30 a.m. - 12.30 p.m. – 10MBA11-Management & Behavioural Process – 10MBA12-Managerial Economics – 10MBA13-Statistics for Management – 10MBA14-Accounting for Managers II Sem. 9.30 a.m. - 12.30 p.m. 10MBA21 – Quantitative Techniques for Management – 10MBA22 – Indian Business Environment – 10MBA23 – Financial Management – 10MBA24 – Business Law – III Sem. 2.00 p.m. - 5.00 p.m. – – – 10MBA31 – Strategic Management – 10MBA32 – Management Accounting & Control Systems – 10MBA33 – Operations Management IV Sem. 2.00 p.m. - 5.00 p.m. – – 10MBA41 – Change and Knowledge Management – 10MBA42 – Entrepreneurial Development – 10MBA43 – Supply Chain Management – 10MBAMM415 – Rural Marketing 10MBAFM425 – Project Appraisal Planning & Control 10MBAIS435 – Multimedia Applications Programming Using VB 10MBAHR445/10MBAIB465 – International Human Resource Management 10MBAPM455 – Project Management 10MBABF475 – Treasury & Risk Management 28/06/2012, Thursday – 10MBA25 – Human Resource Management – 29/06/2012, 10MBA15-Management Information Systems Friday – 10MBAMM311– Business Marketing 10MBAFM321– Advanced Financial Management 10MBAIS331– Object Oriented Programming Systems Using Java 10MBAHR341– Organizations Design & Organization Development 10MBAPM351– Materials Management 10MBAIB361– International Business Environment 10MBABF371– Principles & Practice of Banking & Insurance – 02/07/2012, Monday – ...
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...EFFECTIVE FROM THE SESSION: 2012-2013 Semester –I ITM UNIVERSITY, NEW RAIPUR Master of Business Administration Semester –I List of subject for Academic Session 2012 – 13. Serial No. 1. 2. 3. 4. 5. 6. 7. 8. List of Subjects Principles of Management Managerial Economics Financial Accounting Environment Management Quantitative Techniques Business Legislation Communication Skills- I Computers for Managers ITM UNIVERSITY, RAIPUR Master of Business Administration Subject: Principles of Management Semester-I Unit I Introduction - Nature, function, definition and importance of management, Definition, nature, purpose and scope of management, Functions of a manager, an overview of planning, organizing, staffing leading and controlling. Is management a science or art? Unit II Development of Management Thought - Scientific management; Contribution of Taylor, Fayol, Mary Follet, Elton Mayo; Hawthorne experiments, Contingency approach, Indian heritage in production and consumption. Management and administration, Management as a profession, Professionalism of management in India, Management ethics and management culture, Skills required of manager, Classification of skills, Methods of skills development. Unit III Management Planning - Concept of planning, objectives, Nature, Types of plan, Stages involved in planning, Characteristics of a good plan, Importance, Limitations of planning, Making planning effective, Strategic planning in Indian Industry, MBO. Decision Making...
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...Office of the New York State Comptroller Division of Local Government and School Accountability LOCAL GOVERNMENT M ANAGEMENT GUIDE Management’s Responsibility for Internal Controls Thomas P. DiNapoli State Comptroller For additional copies of this report contact: Division of Local Government and School Accountability 110 State Street, 12th floor Albany, New York 12236 Tel: (518) 474- 4037 Fax: (518) 486- 6479 or email us: localgov@osc.state.ny.us www.osc.state.ny.us October 2010 Table of Contents Who’s Responsible.............................................................................................................. 2 The Origin - Committee of Sponsoring Organizations ......................................................... 4 Integrated Internal Control Framework - The Big Picture ..................................................... 5 The Five Essential Elements of the Internal Control Framework ........................................... 6 Limitations of Internal Controls ..........................................................................................15 The Impact of Information Technology ...............................................................................16 The Role of Internal Auditors and Audit Committees ..........................................................17 Conclusion ....................................................................................................................... 20 Additional Resources...
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...make business decisions if financial information failed to reflect business operation and the company’s financial status. Broadly, the market would hurt due to the negative impact on the market efficiency. As a result, COSO, the Committee of Sponsoring Organizations of the Treadway Commission, was formed in 1985. It has published several comprehensive frameworks to help organizations to improve business operation and governance and to avoid fraud. The aim of this report was to study the development of COSO, including its history and main frameworks and guidance regarding internal control, enterprise risk management and fraud deterrence. The report interpreted the three areas under COSO framework with their key compositions and most recent updates. After the detailed interpretation, conclusion and recommendations were given. Keywords: Fraudulent Financial Reporting, COSO, Internal Control, ERM, Fraud Introduction and Background Financial information is a significant and unique composition of the world of business. Analysis on financial information can always help users to make business decisions. However, driven by short-term profit and specific business purposes, companies would take the risk of releasing fraudulent financial reporting. Fraudulent information would fail to lead to good business decisions. Back to 1970s, due to the occurrence of questionable corporate political campaign practices like the Watergate...
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...internal control Adam Moser ACC/544 November 21, 2010 Carla Henryhand internal control With increased significance placed on the control environment, the focus of internal control has changed from policies and procedures to an overriding philosophy and operating style within the organization. An organization today needs to have an internal control system. Internal control can be described as any action taken by an organization to help enhance the likelihood that the objectives of the organization will be achieved. In the United States many organizations have adopted the internal control concepts presented in the report of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Published in 1992, the COSO report defines internal control as, a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories. The following categories are, one effectiveness and efficiency of operations, two reliability of financial reporting, and three compliance with applicable laws and regulations (Enotes, 2010). COSO describes internal control as consisting of five essential components. These components, which are subdivided into seventeen factors, include, one the control environment, two risk assessment, three control activities, four information and communication and five monitoring (Enotes, 2010). The COSO model is depicted as a pyramid...
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...application and other explanatory material in the CICA Handbook – Assurance. auditing and assurance FOR PUBLIC ACCOUNTANTS PERFORMING AUDIT AND REVIEW ENGAGEMENTS BULLETIN Staff contact Chi Ho Ng, CA, CPA(IL), MBA Principal Auditing and Assurance Standards Department 277 Wellington Street West Toronto, ON M5V 3H2 Tel: (416) 204-3443 E-mail: chiho.ng@cica.ca Fax : (416) 204-3408 Auditing Considerations in an Uncertain Economic Environment Uncertainties in the current economic environment There is a possibility that the Canadian economy may weaken in the near term. This has been noted in various sources, including the economic forecast for Canada issued by the Organization for Economic Co-operation and Development. Heightened risks from renewed financial-market turmoil linked to the European sovereign debt crisis and high levels of household indebtedness are eroding consumer confidence. In January 2009, staff of the Auditing and Assurance Standards Board (AASB) issued a Risk Alert, “Auditing Considerations in the Current Economic Environment,” to highlight matters for auditors to consider when responding to higher risks of material misstatements of financial statements of entities significantly affected by the 2007/2008 downturn in the Canadian economy. This Bulletin updates the January 2009 Risk Alert to make reference to the Canadian Auditing Standards...
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...Managing People and Organisations 1. With references to the case study, summarise the relationship between goals, objectives and policy and advice the management of Scotia Airways of the contribution each will make to effective managerial performance. Goals determine the nature of inputs (the employees, management efforts) and outputs (quality of service). Goals also determine the interaction it has with its external environment. It is a future expectation. Goals are generically for an achievement or accomplishment for which certain efforts are put. Objectives are specific targets within the general goal, are time-related to achieve a certain task. The words Goal and Objective are often confused with each other. They both describe things that a person may want to achieve or attain but in relative terms may mean different things. Both are desired outcomes of work done by a person but what sets them apart is the time frame, attributes they are set for and the effect they inflict. Comparison chart | Goal | Objective | Meaning: | The purpose toward which an endeavour is directed. | Something that one's efforts or actions are intended to attain or accomplish; purpose; target. | Action: | Generic action, or better still, an outcome toward which we strive. | Specific action - the objective supports attainment of the associated goal. | Measure: | Goals may not be strictly measurable or tangible. | Must be measurable and tangible. | Time frame: | Longer...
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...Role of Internal Auditors in the Anti-Corruption Battle John FlahertyThe Challengeh Bribery, and other illicit payments are contrary to the public good. They thwart the competitive process and circumvent laws, regulations, and procedures put in place for the public good. They divert funds from owners, shareholders, and are usually paid as fees, commissions, or are paid without record. The cost to the public totals millions of dollars annually. The US Government is aware of almost 100 cases in which foreign bribes undercut the ability of US firms to win contracts valued at $45 billion in the 12 months before May 1995. "Corruption occurs when someone has monopoly power over a good or a service, has the discretion to decide whether or not you receive it and how much you receive, and lacks accountability." (Robert Klitgaard, Controlling Corruption, 1988). The level of corruption in international business transactions continues to be a critical problem. Companies need both the motivation and the governance practices to discontinue these payments Role of Internal Auditors in the Anti-Corruption Battle John FlahertyThe Challenge Bribery, and other illicit payments are contrary to the public good. They thwart the competitive process and circumvent laws, regulations, and procedures put in place for the public good. They divert funds from owners, shareholders, and are usually paid as fees, commissions, or are paid without record. The cost to the public totals millions of dollars...
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