About Me
CPA
1 Regulation (REG)
1.1 Ethics, Professional Responsibilities, and Federal Tax Procedures
1.1 1 Professional ethics and responsibilities
1.1 2 Federal tax procedures and practices
1.1 3 Circular 230
1.2 Business Law
1.2 1 Legal rights, duties, and liabilities of entities
1.2 2 Contracts and sales
1.2 3 Property and bailments
1.2 4 Agency and employment
1.2 5 Business organizations
1.2 6 Bankruptcy
1.2 7 Secured transactions
1.3 Federal Taxation of Property Transactions
1.3 1 Basis determination and adjustments
1.3 2 Gains and losses from property transactions
1.3 3 Like-kind exchanges
1.3 4 Depreciation, amortization, and depletion
1.3 5 Installment sales
1.3 6 Capital gains and losses
1.3 7 Nontaxable exchanges
1.4 Federal Taxation of Individuals
1.4 1 Gross income inclusions and exclusions
1.4 2 Adjustments to income
1.4 3 Itemized deductions and standard deduction
1.4 4 Personal and dependency exemptions
1.4 5 Tax credits
1.4 6 Taxation of individuals with multiple jobs
1.4 7 Taxation of nonresident aliens
1.4 8 Alternative minimum tax
1.5 Federal Taxation of Entities
1.5 1 Taxation of C corporations
1.5 2 Taxation of S corporations
1.5 3 Taxation of partnerships
1.5 4 Taxation of trusts and estates
1.5 5 Taxation of international transactions
2 Financial Accounting and Reporting (FAR)
2.1 Conceptual Framework, Standard-Setting, and Financial Reporting
2.1 1 Financial reporting framework
2.1 2 Financial statement elements
2.1 3 Financial statement presentation
2.1 4 Accounting standards and standard-setting
2.2 Select Financial Statement Accounts
2.2 1 Revenue recognition
2.2 2 Inventory
2.2 3 Property, plant, and equipment
2.2 4 Intangible assets
2.2 5 Liabilities
2.2 6 Equity
2.2 7 Compensation and benefits
2.3 Specific Transactions, Events, and Disclosures
2.3 1 Leases
2.3 2 Income taxes
2.3 3 Pensions and other post-retirement benefits
2.3 4 Derivatives and hedging
2.3 5 Business combinations and consolidations
2.3 6 Foreign currency transactions and translations
2.3 7 Interim financial reporting
2.4 Governmental Accounting and Not-for-Profit Accounting
2.4 1 Governmental accounting principles
2.4 2 Governmental financial statements
2.4 3 Not-for-profit accounting principles
2.4 4 Not-for-profit financial statements
3 Auditing and Attestation (AUD)
3.1 Engagement Planning and Risk Assessment
3.1 1 Engagement acceptance and continuance
3.1 2 Understanding the entity and its environment
3.1 3 Risk assessment procedures
3.1 4 Internal control
3.2 Performing Audit Procedures and Evaluating Evidence
3.2 1 Audit evidence
3.2 2 Audit procedures
3.2 3 Analytical procedures
3.2 4 Substantive tests of transactions
3.2 5 Tests of details of balances
3.3 Reporting on Financial Statements
3.3 1 Audit report content
3.3 2 Types of audit reports
3.3 3 Other information in documents containing audited financial statements
3.4 Other Attestation and Assurance Engagements
3.4 1 Types of attestation engagements
3.4 2 Standards for attestation engagements
3.4 3 Reporting on attestation engagements
4 Business Environment and Concepts (BEC)
4.1 Corporate Governance
4.1 1 Internal controls and risk assessment
4.1 2 Code of conduct and ethics
4.1 3 Corporate governance frameworks
4.2 Economic Concepts
4.2 1 Microeconomics
4.2 2 Macroeconomics
4.2 3 Financial risk management
4.3 Financial Management
4.3 1 Capital budgeting
4.3 2 Cost measurement and allocation
4.3 3 Working capital management
4.3 4 Financial statement analysis
4.4 Information Technology
4.4 1 IT controls and security
4.4 2 Data analytics
4.4 3 Enterprise resource planning (ERP) systems
4.5 Operations Management
4.5 1 Strategic planning
4.5 2 Project management
4.5 3 Quality management
4.5 4 Supply chain management
3 1 4 Internal Control Explained

1 4 Internal Control Explained

Key Concepts

Internal Control

Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.

Control Environment

The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure.

Example: A company with a strong control environment emphasizes integrity and ethical values, effective board oversight, and clear management responsibilities.

Risk Assessment

Risk assessment involves identifying and analyzing risks relevant to the achievement of objectives. This process includes understanding the nature of business risks and estimating their significance.

Example: A manufacturing company identifies risks such as supply chain disruptions, changes in consumer demand, and regulatory changes. By assessing these risks, the company can develop strategies to mitigate their impact.

Control Activities

Control activities are the policies and procedures that help ensure management directives are carried out. These activities help prevent or detect and correct errors or irregularities.

Example: A retail company implements control activities such as segregation of duties, approval processes for purchases, and physical inventory counts to ensure accurate financial reporting.

Information and Communication

Information and communication involve the identification, capture, and exchange of information in a form and timeframe that enable people to carry out their responsibilities. Effective communication must occur in a broader sense, flowing down, across, and up the organization.

Example: A financial services company uses an enterprise resource planning (ERP) system to capture and process financial data. Clear communication channels ensure that employees understand their roles and responsibilities in maintaining internal controls.

Monitoring

Monitoring is the process of assessing the quality of internal control performance over time. It involves ongoing monitoring activities and separate evaluations.

Example: An internal audit department regularly reviews the company's financial processes and controls. Feedback from these reviews helps management identify areas for improvement and ensure that controls are functioning as intended.

Examples and Analogies

Consider internal control as a "security system" for an organization. The control environment is like the "foundation and structure" of the system, ensuring stability and integrity.

Risk assessment is akin to "surveillance cameras" that identify potential threats. Control activities are like "locks and alarms" that prevent or detect unauthorized access.

Information and communication are like "intercom systems" that ensure clear and timely communication among all parts of the system. Monitoring is like "regular maintenance checks" that ensure the system is functioning properly.

© 2024 Ahmed Baheeg Khorshid. All rights reserved.