Internal Control and Control SelfAssessment

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Internal Control and Control Self-Assessment

• Modern Tools for Modern Times

OCFS - Audit Quality Control
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ORIGIN OF COSO

• COMMITTEE OF
• SPONSORING ORGANIZATIONS
• (TREADWAY COMMISSION)

• AICPA Advisory Committee
• American Accounting Institute
• Institute of Internal Auditors
• Institute of Mgmt Accountants
• Financial Executives Institute

Internal Control System
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I N T E R N A L C O N T R O LIS A PEOPLE
PROCESS
ACTIONS TAKEN BY MANAGEMENT STAFFTO PROVIDE
REASONABLE ASSURANCE THAT AGENCY WILL ACHIEVE

• FOUR OBJECTIVES

• O perations are Effective / Efficient
• C ompliance with Laws Regs
• F inancial Mgmt Reporting - Reliable
• S afeguard Assets

Internal Control System
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COSO Ingredients

• FIVE COMPONENTS

• Control Environment
• Risk Assessment
• Control Activities
• Information Communication
• Monitoring

Internal Control System
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Control Environment

• Sets the Tone of Organization
• Foundation for All Other Components
• Integrity, Ethical Values Competence
• Management's Philosophy Operating Style
• Assignment of Authority Responsibility
• Organizational Structure

Internal Control System
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Risk Assessment
RISKS CAN GET IN THEWAY OF OBJECTIVES

• Precondition Establishment of Objectives
• Can Be External or Internal
• e.g. External - Adoption Safe Families Act
• e.g. Internal - Connections
• Relates Risks to Achievement of Objectives
• Determines How Risks Are to Be Managed

Internal Control System
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Control Activities

• Policies Procedures
• Ensure Actions Are Taken to Address Risks
• Include Approval, Authorization, Verification,
  Reconciliation, Segregation of Duties, etc.

Internal Control System
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Information Communication

• Must Be Timely Relevant
• Can Be Operational, Financial or
  Compliance-Related
• Must Cover Internal External Events (e.g. ASFA
  requirements, Marisol)
• Must Flow Down, Across Up
• Must Involve External Parties

Internal Control System
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Monitoring Evaluation

• Need to Assess Quality Over Time
• Can Be Ongoing and/or Separate Evaluations
• Occurs During the Normal Course of Business
• Scope Frequency of Separate Evaluations Should
  Be Related to Risk Effectiveness of Ongoing
  Monitoring

Internal Control System