Internal Control in a Financial Statement Audit

These flashcards cover essential vocabulary related to internal control in financial statement audits, including concepts, practices, and frameworks explained in the lecture notes.

Internal Control

A process designed and implemented by an organization's management and board of directors to provide reasonable assurance regarding the achievement of objectives related to operations, reporting, and compliance.

GAAS

Generally Accepted Auditing Standards; principles that provide a framework for conducting audits.

Material Misstatement

An error or omission in financial statements that could influence the economic decisions of users.

Control Environment

The foundation of internal control, encompassing the governance and management functions that establish the tone at the top.

Risk Assessment

The process of identifying and analyzing risks that could prevent the organization from achieving its objectives.

Control Activities

Policies and procedures in place to ensure that management directives to address risks are carried out.

Information and Communication

The system that supports the operation of internal control and enables the necessary flow of information throughout the organization.

Monitoring Activities

Processes to assess the quality of internal control performance over time and ensure that controls are working effectively.

COSO Framework

A widely accepted framework for designing and evaluating an organization’s internal control system.

Segregation of Duties

The division of responsibilities among different individuals to reduce the risk of error or fraud.