Professional Documents
Culture Documents
Internal Control
and COSO
Framework
Internal Control
and COSO
Framework
Management stewardship
Credibility
Independent examination
Enron case
Business Model : trading of derivatives/ energy derivatives
sobrang laki so nagka PRC but purpose was defeated because nagpapataasan ng kita
pressure on higher income because bullish din market nun
tacics used: exploited mark to market (high paper profits)
sila nagpepredict ng values, nagtetrade sila ng long term contracts without a ready market
may related party SPEs din
(2001) business risl out of control, energy prices at a low
why need audit?
arthur andersen 2nd largest client Enron
so di na sila nagtetest ng assumption
criminal liab: bad faith na kasi working papers destroyed before
turning point of profession
Objective of audit
To enable the auditor to express an opinion about
whether the financial statements are prepared, in all
material respects, in accordance with an
applicable financial reporting framework and that
the financial statements are presented fairly in all
material respects.
maam's example: sometimes kulang accounting expertise ni client company so ikaw talaga magpopropose what
to do
Attest vs Advisory
0 L R A
never
Level of Assurance mangyayari
*cost benefit
analysis
Advisory services
Compilation
Review
engagements Audit
engagements
Agreed-upon
procedures
tama amount
Accuracy
tamang period
Cutoff
COCAC
Financial statement assertions
Completeness
Valuation
Presentation & disclosure especially sa current
noncurrent
CVPRE
Financial statement assertions fs level as a whole
AR = IR x CR x DR
audit risk - mali pala
pero auditor deemed
inherent risk
- susceptibility to
control risk
- risk that a misstatement
detection risk
- risk na di madetect
as tama (what we a misstatement could occur even ni auditor
want to avoid) with existing IC - only one we have control
- risk na di madetect/control of
ng ic
Stages of an audit wala dito yung ACCEPTANCE
Internal Control
and COSO
Framework
Reporting
Compliance
and timeliness, laws and
efficiency of transparency regulations
entitys in internal or
operations external
Operational financial and
and financial non-financial
performance reporting
goals
Safeguarding
assets
against loss
SOX of 2002
Summary of Section 302
Periodic statutory financial reports are to include
certifications that:
The signing officers have reviewed the report
The report does not contain any material
untrue statements or material omission or be
considered misleading
The financial statements and related information
fairly present the financial condition and the
results in all material respects
SOX of 2002
Summary of Section 302
Periodic statutory financial reports are to include
certifications that:
The signing officers are responsible for internal
controls and have evaluated these internal
controls within the previous ninety days and have
reported on their findings
A list of all deficiencies in the internal controls
and information on any fraud that involves
employees who are involved with internal activities
Any significant changes in internal controls or
related factors that could have a negative impact
on the internal controls
SOX of 2002
Summary of Section 404
Issuers are required to publish information in
their annual reports concerning the scope and
adequacy of the internal control structure and
procedures for financial reporting. This statement
shall also assess the effectiveness of such
internal controls and procedures.