CHAPTER 1: INTERNAL CONTROLS
Most organizations in the U.S. build their internal controls around a recognized framework that was created by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. The COSO framework meets the requirements laid out in SOX and other regulations, such as the Anti- Money laundering (AMl) rules of the Bank Secrecy Act, the foreign Corrupt Practices Act (fCPA), and the Customer Information Program (CIP) regulations of the PATRIOT Act—also known as Know Your Customer (KYC).
COSO: Five Components in Assessing Internal Controls
Control Environment
Integrity, Ethics, Values & Competence
Missing Basic Controls
Risk Assessment
Contral Activities
Preventive Controls
Detective Controls
Both Controls
Compensating Controls
Separation of Duties Control
Analysis Control
Quality Control
Level of Authority Control
Processing Control
Reconciliation Control
Safeguard Control
Physical Control
System Control
Three Top Controls
FIGURE 2
There are five interrelated components in assessing internal controls:
1. Control environment 2. Risk assessment 3. Control activities 4. Information and communication (or Proper Authorization activities) 5. Monitoring activities
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