ACCTG 201 Chapter Notes - Chapter 4: Internal Control, Financial Statement, Cash Cash
Document Summary
Companies issue incorrect financial statements for two reasons: errors and fraud. Fraud - person intentionally deceives another person for personal gain or to damage that person. Internal controls - company"s plans to safeguard the company"s assets and improve the accuracy and reliability of accounting information. Sarbanes-oxley act - applies to all companies that are required to file financial statements with the sec. Established a variety of guidelines related to auditor-client relations and internal control procedures. Committee of sponsoring organizations (coso) - provided a framework for designing an internal control system. Dedicated to improving the quality of financial reporting through effective internal controls. Control environment - sets the overall ethical tone of the company with respect to internal control. Includes formal policies related to management"s philosophy, assignment of responsibilities, and organizational structure. Risk assessment - identifies and analyzes internal and external risk factors that could prevent a company"s objectives from being achieved.