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Home > Accounting & Auditing > Internal Controls: Theory & Practice
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Knowledge Level
Copyright 2015

Publication Date
July, 2015
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Internal Controls: Theory & Practice
Introduction Organization Learning Objectives Author Bios
Title: Internal Controls: Theory and Practice
Prerequisite: None
Advance Preparation: None
Knowledge Level: Basic
Subject Matter Area: Auditing
Date of Publication: July 2015
Copyright © 2015 Thomson Reuters/Tax & Accounting. Thomson Reuters, Checkpoint Learning and the Kinesis logo are trademarks of Thomson Reuters and its affiliated companies
Recommended CPE Credits:  
     Online Only: 6 QAS/Registry (based on 50-minute hour)
Expiration Date: One year from date of receipt to complete program and submit quizzer to obtain credit
Passing Grade for Quizzer: 70 percent or higher

With internal control issues gaining attention in recent years, practitioners should be well-versed in this area. This course discusses the important role internal control plays in achieving fair and accurate financial. It reviews the laws and regulations that focus on activities designed to meet objectives related to the accuracy of financial reporting. This program provides a review of the origins and development of the COSO internal control model. It has been updated to reflect recent revisions in the COSO internal control Framework, and will cover the definition, objectives, and elements of internal control. Current regulations require assessments by management and auditors on the design and operational effectiveness of controls. To assist practitioners with these requirements, this program will describe the five components of internal control, along with the seventeen principles, and accompanying points of focus, that relate to each of the components. Finally, it will cover the costs, benefits, and limitations of internal control.

Use of Materials

The user should begin by watching the streamed video segment, if any, or listening to the streamed audio segment, if any, for the chapter before reading the text. The user may wish to make notes of the most important concepts and any terms that are new. Next, the user should review the learning objectives at the beginning of the chapter and read the chapter. The user should work through each of the examples. After the user has studied each chapter, s/he should click on the link at the left to complete the interactive study questions. If the user answers a study question incorrectly, s/he should review the section of the text that is indicated at the end of the explanation to the study question to assure comprehension of the material. The user should review the learning objectives once more to consider achievement of the objectives. After the user has finished watching the streamed video, if any, or listening to the streamed audio, if any, and reading the text and working through the study questions, s/he may wish to review her/his notes and any sections of the text or video/audio, if any, that were difficult. When the user is ready, s/he should click on the link to the left to complete the quizzer. The user's CPE certificate will be provided immediately upon successful completion of the quizzer.

This program is divided into ten (10) chapters.

Chapter 1 reviews the origins and development of the COSO internal control model.

Chapter 2 focuses on the definition and elements of internal control.

Chapter 3 describes the control environment component of internal control

Chapter 4 describes the risk assessment component of internal control

Chapter 5 describes the control activities component of internal control

Chapter 6 describes the information and communication component of internal control

Chapter 7 describes the monitoring activities component of internal control

Chapter 8 closes with the costs, benefits, and limitations of internal control.

Chapter 9 contains a glossary that defines frequently used key terms.

Chapter 10 contains an Appendix.

Helpful Guidance

A CPEASYalert is intended to warn the practitioner of a particular situation that may require action or other consideration by the client/the practitioner on behalf of the client.

A CPEASYpoint presents analysis or commentary that attempts to explain or clarify authoritative guidance.

A CPEASYtip provides practical advice that may be used to help improve client service or service to the practitioner's organization.

Upon successful completion of this program, the user should be able to:

  • Identify the basic concepts of internal control

  • Recognize the need to update the Framework and identify developments since the new Framework was published.

  • Describe the three categories of objectives for internal control and list the specific kinds of objectives that would fit in each

  • Identify the five components of internal control and explain their relationship to objectives

  • Discuss the role of principles in the COSO Framework and their relationship to components

  • Explain the difference between responsibility and accountability and the role of both in internal control

  • Describe the relationship between corporate culture and the control environment

  • Identify four principles of risk assessment in a system of internal control

  • Discuss how the establishment and alignment of objectives relate to risk assessment

  • Identify the control activities principles related to internal control

  • Discuss the difference between business process versus transaction control activities

  • Describe how an organization should deploy control activities

  • Identify the principles relating to information and communication for internal control

  • Discuss obtaining, generating, and using information

  • Describe the differences in communication that result from communicating internally versus externally

  • Identify the principles of monitoring activities relating to internal control

  • Differentiate between monitoring and control activities, and discuss factors affecting the mix of monitoring activities selected

  • Identify various benefits and limitations of internal control

  • Recognize COSO's current emphasis on information technology, cyber risk, risk management, and the integration of the Internal Control and Risk Management Frameworks to improve entity performance

Kyleen W. Prewett, DBA, CPA, CGFM, is the Associate Director for Finance & Administration for the University of Arkansas Division of Agriculture – Cooperative Extension Service. Prior to current position, Dr. Prewitt was Chief Financial Officer for Arkansas Medicaid, Director of Financial Services for University of Arkansas Cooperative Extension Service, and also owned and managed a training and consulting business that assisted organizations in strengthening internal controls and addressing other corporate governance issues. In addition, Dr. Prewett has published in such journals as The Journal of Corporate Accounting and Finance, The Journal of International Accounting, Auditing, and Taxation, The Internal Auditor, and the Journal of Government Financial Management. Dr. Prewett's previous work experience includes teaching for the University of Arkansas at Little Rock, employment with the Division of Legislative Audit in Louisiana and various accounting positions with health care, construction, and oil and gas companies. In addition to her other responsibilities, Dr. Prewitt is an author for Bisk Education, Inc. In this role, she develops self-study continuing education courses for CPAs. (Author)

Karen M. Oxner, DBA, CPA, is an Associate Professor and Chair of the Department of Economics and Business at Hendrix College. Prior to joining Hendrix College in 1997, she held the position of Internal Audit Senior for the Environmental Systems Company. She began her career with Ernest and Young (Little Rock) as an auditor and consultant. She has written for numerous publications and has conducted various presentations for professional organizations. She is a member of the American Accounting Association and the Arkansas Society of CPAs. (Author)

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