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PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cyn...
1A-2
Corporate Governance
The system byThe system by
which a company is directedwhich a company is directed
and controlled...
1A-3
The Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 was intended to protect the
interests of those who inve...
1A-4
The Sarbanes-Oxley Act of 2002
(continued)
 The Act requires a public company’s independent auditor
to issue an opin...
1A-5
Internal Control
Internal control is a process designed toInternal control is a process designed to
provide reasonabl...
1A-6
Internal Control
Type of Internal Controls for Financial Reporting
Type of Control Classification Description
Authori...
1A-7
Internal Control
Type of Internal Controls for Financial Reporting
Type of Control Classification Description
Physica...
1A-8
Internal Control
Internal controls cannot guarantee that
objectives are achieved because:
▫ Even well-designed intern...
1A-9
End of Appendix 1A
1A-9
End of Appendix 1A
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Managerial Accounting 15th ed Chapter 1A

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Managerial Accounting 15th ed Chapter 1A

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Managerial Accounting 15th ed Chapter 1A

  1. 1. PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Corporate Governance Appendix 1A
  2. 2. 1A-2 Corporate Governance The system byThe system by which a company is directedwhich a company is directed and controlled.and controlled. Board of Directors Board of Directors Top Management Top Management StockholdersStockholders To pursue objectives of Incentives and monitoring for
  3. 3. 1A-3 The Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 was intended to protect the interests of those who invest in publicly traded companies by improving the reliability and accuracy of corporate financial reports and disclosures. Six key aspects of the legislation include:  The Act requires both the CEO and CFO to certify in writing that their company’s financial statements and disclosures fairly represent the results of operations.  The Act establishes the Public Company Accounting Oversight Board to provide additional oversight of the audit profession.  The Act places the power to hire, compensate, and terminate public accounting firms in the hands of the audit committee.  The Act places restrictions on audit firms, such as prohibiting public accounting firms from providing a variety of non-audit services to an audit client. The Sarbanes-Oxley Act of 2002 was intended to protect the interests of those who invest in publicly traded companies by improving the reliability and accuracy of corporate financial reports and disclosures. Six key aspects of the legislation include:  The Act requires both the CEO and CFO to certify in writing that their company’s financial statements and disclosures fairly represent the results of operations.  The Act establishes the Public Company Accounting Oversight Board to provide additional oversight of the audit profession.  The Act places the power to hire, compensate, and terminate public accounting firms in the hands of the audit committee.  The Act places restrictions on audit firms, such as prohibiting public accounting firms from providing a variety of non-audit services to an audit client.
  4. 4. 1A-4 The Sarbanes-Oxley Act of 2002 (continued)  The Act requires a public company’s independent auditor to issue an opinion on the effectiveness of the company’s internal control over financial reporting to accompany management’s assessment, and both are included in the company’s annual report. f. The Act establishes severe penalties for certain behaviors, such as: • Up to 20 years in prison for altering or destroying any documents that may eventually be used in an official proceeding. • Up to 10 years in prison for retaliating against a “whistle blower.” (continued)  The Act requires a public company’s independent auditor to issue an opinion on the effectiveness of the company’s internal control over financial reporting to accompany management’s assessment, and both are included in the company’s annual report. f. The Act establishes severe penalties for certain behaviors, such as: • Up to 20 years in prison for altering or destroying any documents that may eventually be used in an official proceeding. • Up to 10 years in prison for retaliating against a “whistle blower.”
  5. 5. 1A-5 Internal Control Internal control is a process designed toInternal control is a process designed to provide reasonable assurance thatprovide reasonable assurance that objectives are being achieved.objectives are being achieved. Preventive ControlsPreventive Controls Prevents or detersPrevents or deters undesirable eventsundesirable events Detective ControlsDetective Controls Detects undesirableDetects undesirable eventsevents
  6. 6. 1A-6 Internal Control Type of Internal Controls for Financial Reporting Type of Control Classification Description Authorizations Preventive Requiring management to formally approve certain types of transactions. Reconciliations Detective Relating data sets to one another to identify and resolve discrepancies. Segregation of Preventive Separating responsibilities related to authorizing Duties transactions, recording transactions, and maintaining custody of the related assets.
  7. 7. 1A-7 Internal Control Type of Internal Controls for Financial Reporting Type of Control Classification Description Physical Preventive Using cameras, locks, and physical barriers to Safeguards protect assets. . Performance Detective Comparing actual performance to various Reviews benchmarks to identify unexpected results. Maintaining Detective Maintaining written and/or electronic evidence to Records support transactions. Information Preventive/ Using controls such as passwords and access Systems Detective logs to ensure appropriate data restrictions. Security
  8. 8. 1A-8 Internal Control Internal controls cannot guarantee that objectives are achieved because: ▫ Even well-designed internal control systems can break down. ▫ Two employees may collude to circumvent the control system. ▫ Senior leaders may manipulate financial results by intentionally overriding prescribed policies and procedures. Internal controls cannot guarantee that objectives are achieved because: ▫ Even well-designed internal control systems can break down. ▫ Two employees may collude to circumvent the control system. ▫ Senior leaders may manipulate financial results by intentionally overriding prescribed policies and procedures.
  9. 9. 1A-9 End of Appendix 1A
  10. 10. 1A-9 End of Appendix 1A

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