Chapter 1 reviews the origins and development of the COSO.

Chapter 2 focuses on the definition of internal control.

Chapter 3 reveals the different components of internal control.

Chapter 4 discusses the highlights of the various regulations and standards that support internal control.

Chapter 5 focuses on the need for documentation as well as various evaluation techniques practitioners can use for assessing an entity's internal control.

Chapter 6 closes with the costs, benefits, and limitations of internal control.

• Know the significance of the Foreign Corrupt Practices Act of 1977 on internal controls for publicly traded companies

• Be familiar with the structure of the Treadway Commission and that it was formed in response to the S&L debacle

• Understand the origins of the COSO Report (Internal Control—Integrated Framework)

• Identify some of the steps taken to develop the COSO Framework and appreciate the thoroughness of the methodology employed

• Describe some of the events that led to the passage of the Sarbanes-Oxley Act of 2002 (SOX)

• Recognize the similarities between the events that led to the COSO Report and the events that led to the Sarbanes-Oxley Act of 2002 (SOX)

• Grasp the significance of the establishment of the Public Company Accounting Oversight Board (PCAOB) and understand its basic objectives

• Be able to list the five components of good internal control in the COSO model and grasp their basic function in the model

• Understand the interrelationship of the five components of internal control

• Know the term "vertical alignment" and understand its relationship to the COSO model

• Be able to identify the seven attributes to consider in shaping the control environment

• Identify ways management can demonstrate its commitment to integrity and ethical values

• Understand the role and importance of both vertical and horizontal alignment of objectives

• Know the phases of risk assessment

• Know the types of events or conditions that warrant special consideration when managing change in an organization

• Understand the importance of IT controls

• Be able to distinguish between general and application controls

• Know the types of ongoing monitoring activities

• Know how the five components operate together to support the achievement of objectives

• Know that the main internal control provisions of SOX are found in §§302 and 404

• Understand the role and purpose of the Public Company Accounting Oversight Board (PCAOB)

• Know the basic requirements of the PCAOB's Auditing Standard (AS) No. 5 and to what organizations it applies

• Appreciate the differences between control deficiencies, significant deficiencies, and material weaknesses

• Comprehend the role of preventive and detective controls in a system of internal control

• Appreciate the difference in control requirements between publicly traded and private companies

• Understand the source of internal control requirements for governmental and nonprofit organizations

• Recognize the internal control standards found in OMB Circular A 123

• Be aware of the internal control requirements found in the Yellow Book audit standards of the Government Accountability Office (GAO)

• Recognize that additional control requirements can be found in contracts, local legislation, and board directives

• Appreciate the advantages and disadvantages of documenting controls using: narratives; traditional control questionnaires; control self-assessment questionnaires; control self-assessment workshops; flowcharts; matrices; and software.

• Understand which methods are better for "soft" controls and why

• Appreciate the unique structure and purpose of control self-assessment questionnaires and workshops

• Be familiar with the factors that must be considered when deciding whether and/or which software to purchase

• Understand the role internal control can play in reducing awards under the Federal Sentencing Guidelines

• Recognize the events and circumstances that can cause controls to fail

Cynthia M. Daily, CPA, MBA, DBA, is an assistant professor of accounting at the University of Arkansas at Little Rock. Ms. Daily has taught previously at a number of institutions around the country. In addition, she has worked in both auditing and tax. Ms. Daily has been published in a number of well known journals including The Journal of Accountancy, The CPA Journal, and Internal Auditing. (Speaker)