1. A company uses benchmark data to assess losses from theft. It then compares its own data with those of other companies. 2. The company adopts the use of narratives and data flow diagrams to document the procedures relating to its financial reporting. 3. The audit committee is committed to establish procedures for “whistleblowing” any accounting, internal control, and auditing matters from employees, customers, and suppliers. 4. The accounting department performs a three-way match by comparing data between the purchase order, goods received note, and invoice to ensure mathematical accuracy. 5. The company establishes a number of key performance indicators for many financial processes. The management then regularly tracks the performance according to established targets for evaluation. 6. The company strictly follows a full system development life cycle when it develops in-house software. This covers implementation, security, and conversion issues of the software. 7. The company publishes a bi-monthly newsletter on its intranet. The newsletter includes a column on matters relating to the company’s code of conduct, which emphasizes the importance of integrity. 8. The company has developed a financial and internal control reporting package. The accounting department generates the reports every month and submits them to the directors for review. 9. An internal audit department has been established to conduct separate evaluations on the company’s internal controls. 10. The company constantly reviews websites, social media, and trade publications in order to observe changes in the external market. The management then assesses the impact to the company’s operations. Required: Indicate which of the five COSO internal control components is best represented by each internal control. a. Control environment b. Risk assessment c. Control activities d. Information and communication e. Monitoring
10-20 Following are descriptions of 10 internal controls.
1. A company uses benchmark data to assess losses from theft. It then compares its own data with those of other
companies.
2. The company adopts the use of narratives and data flow diagrams to document the procedures relating to its financial reporting.
3. The audit committee is committed to establish procedures for “whistleblowing” any accounting, internal control, and auditing matters from employees, customers, and suppliers.
4. The accounting department performs a three-way match by comparing data between the purchase order, goods received note, and invoice to ensure mathematical accuracy.
5. The company establishes a number of key performance indicators for many financial processes. The management then regularly tracks the performance according to established targets for evaluation.
6. The company strictly follows a full system development life cycle when it develops in-house software. This covers implementation, security, and conversion issues of the software.
7. The company publishes a bi-monthly newsletter on its intranet. The newsletter includes a column on matters relating to the company’s code of conduct, which emphasizes the importance of integrity.
8. The company has developed a financial and internal control reporting package. The accounting department generates the reports every month and submits them to the directors for review.
9. An internal audit department has been established to conduct separate evaluations on the company’s internal controls.
10. The company constantly reviews websites, social media, and trade publications in order to observe changes in the external market. The management then assesses the impact to the company’s operations.
Required:
Indicate which of the five COSO internal control components is best represented by each internal control.
a. Control environment
b. Risk assessment
c. Control activities
d. Information and communication
e. Monitoring
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