Auditing in a Corporate Environment COSO and IDEA - 3025 Words

Auditing in a Corporate Environment with COSO Model of Internal Control & IDEA Software (Research Paper Sample) Content: Auditing in a Corporate Environment with COSO Model of Internal Control IDEA SoftwareClient First Name SurnameInstituteAbstractConventional audit methods are failing to be greatly effective in unmasking the increased number of frauds despite enlarged consideration to internal controls and risk assessment. Financial forensics has acknowledged the necessity for pre-programmed mechanics to fraud analysis though, until now, investigations have not scrutinized the advantages of forensic auditing as a means to identify and prevent corporate fraud. This paper intends to show how such a study is possible. The paper pens with an emphasis on the COSO Model of Internal Control which is gaining universal approval by accounting professionals. The second part highlights the efficiency of IDEA audit software as a tool to support the audit task, meet the regulatory objectives of the management, and to contest fraud. An additional sub-section has been dedicated to the cybercrime re lated issues. Thus, in short, this paper intends to discuss the application and effects of both COSO Model and IDEA audit software.Keywords: Audit, Corporate Environment, COSO Model, Internal Control, IDEA SoftwareAuditing in a Corporate Environment withCOSO Model of Internal Control IDEA SoftwareBrief HistoryThe year 1985 was the formation year of COSO, The Committee of Sponsoring Organizations. COSO was established with a specific agenda of delivering thought leadership along the growth of widespread structure and directives on internal control and fraud prevention. COSO was designed to improve the performance of an organization and omission or diminish the level of organizational fraud. The Committee is an initiative together supported and financed by five private sectors: American Accounting Association (AAA) American Institute of Certified Public Accountants (AICPA) Financial Executives International (FEI) Institute of Management Accountants (IMA) The Institute of Internal Au ditors (IIA)CITATION COS13 \l 1033 (COSO, 2013)COSO aims at lifting business capability by making every function productive CITATION Del131 \l 2057 (Deloitte, 2013). Such structured guidance oriented control management system guarantees the progress of financial reporting paradigm in a business so that accounting, auditing and reporting become much more clear and trustworthy.COSO Model: What does it mean?As per COSO model the definition of internal controls in a business is as follows:..... Internal control is .... a process, effected by an entitys board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in (1) the effectiveness and efficiency of operations(2) the reliability of financial reporting and(3) the compliance of applicable laws and regulations CITATION COS13 \l 1033 (COSO, 2013)According to the COSO Model, the organizational internal control system essentially uses five components: organize sett ing, risk evaluation, information and communication, control actions directing managements instructions and supervision.The Five Main Components of COSO model of Internal Controls 1 Supervision: Supervising activities consists of continuous assessments and isolated assessments or a number of mix procedure of both to control company accounting and fiscal review. CITATION Kap12 \l 1033 (Kaplan Financial Knowledge Bank, 2012).In general, supervision mainly combines two kinds of routes, namely, the continuous one and the other separate ones CITATION Kap12 \l 2057 (Kaplan Financial Knowledge Bank, 2012). While constant assessments offer on time data, separate periodic evaluations refer the efficiency of continuous assessments and prevailing managerial issues. A diverse level of monitoring is necessary for a data to get routinely tested and to avoid internal errors. 2 Information Communication - To ensure internal control there should be smooth flow of information and zero encumbranc e in data communication system. COSO model guarantees that data facts transmitted rightly to the concerned person on time. It also guarantees that the informed data is entirely appropriate to the specified undertaken duty to cope with time and to make other inter-organizational control support processes easier CITATION Kap12 \l 2057 (Kaplan Financial Knowledge Bank, 2012). 3 Preventive Tasks: Organizational directive instructions establish control activities or preventive tasks. Control activities usually intend at lowering of threats CITATION Kap12 \l 2057 (Kaplan Financial Knowledge Bank, 2012). These defensive activities are functional in all levels of dealing for detection of fraudulent activities and to prevent those activities in their nascent stage. However, automated defensive activities are not always completely equipped enough, which proves the necessity of human intervention in any control system. Though it is imperative to differentiate and allot duties according to pr eventive tasks, human intervention can change the task framework to a more realistic and fitting structure. 4 Risk Assessment: Each and every organization faces an array of threats from internal and external roots. Threat assessment relies on the anticipation of any unwanted incident and its harmful effects on the company directives. Risk assessment engages an aggressive and frequentative procedure for deciphering and measuring risks. Thus, threat evaluation configures the basic evaluation of the ways of threat handling system. Circulation of directives, functional at various stages of business, is the prerequisite to risk assessment. Threat evaluation operates and relies heavily on managerial objectives CITATION COS13 \l 2057 (COSO, 2013). Each managerial objective is assessed as per the risks associated with it. Each and every threat can be separately assessed and threat evaluation program can establish means necessary for managing it. 5 Organize Setting: Organize Setting is the set of hypothesis, techniques and structures that shapes the complete inner control skeleton of the business. Organize Setting produces a sense of liability and responsibility between the employees as well as the managements. The setting can only convincingly function in the standards of reliability and obligation for the job. Usually, management and board of directors get different tasks with the intention that the later could monitor the full inner control setting CITATION COS13 \l 2057 (COSO, 2013). The management team usually establish the benchmarks and programs leaving the task of implementing in the efficient hands of the board of directors.How to Apply the COSO Model to IT Audit ProceduresThe COSO model offers some directives that seem pertinent to the regulation for an IT audit of internal controls. One such area of the COSO model that is straightforwardly relevant to the IT audit paradigm is the Control Environment. The general purpose of this assessment is to decide if a particular control environment has the capability to set up and uphold a helpful internal control structure above fiscal statement. Purpose of the threat evaluation trials is to unmask risks connected with the controls linked to the progress, management, scrutinizing and accounting of both those controls and the fiscal reporting information. Reporting about the information used in strategically tactical activities, should be made to the highest level of the organization.The Enterprise Risk Management (ERM) framework of COSO is another relevant area of interest of an IT audit. COSO moduleendows with deep understanding of strategy and the function of ERM in locating and performing those strategies. As the progress of the audit plan in a financial appraisal depends on the object of the risk assessment procedures, the Risk Suite paradigm indicates the organization and its environment, including the milieu of internal controls. COSO framework of ERM magnifies alignment between ERM and organizational performance. The framework illustrates risk reporting to tackle the increasing expectations for greater stakeholder clarity. Each and every business has its own risk management ideas. The question is (1) if the ideas are well equipped, (2) if the ideas are implicit or explicit and (3) if the human resources appreciate and welcome those ideas as part of the organizational norms. Discussions and direct knowledge about threats, their connections and correlations with business setting indicate a constructive and practical risk management culture. COSO framework, further, accommodates growing technological development for analyzing data to sustain administration.COSO aims to improve organizational performance and governance CITATION COS13 \l 1033 (COSO, 2013). Practically, Corporate Governance is the process or act of presenting authoritative organizational directives or control. The order and oversight to the entitys affairs are often provides by the executive manageme nt and the board of directors. Corporate governance is typically comes to their domain and shapes the quality of organization strategy setting. Successful corporate control guarantees responsibility, clarity in the relationship between business and its stakeholders. Since their inception, COSOs integrated framework was projected to supply direction for supervising the application and estimation useful for the processes of internal control and enterprise threat supervision (or ERM) procedures, driving towards the organization progress and corporate control mechanism. If practiced efficiently, the ideas of the framework leads to enhance the performance and organizational control in considerable manner.Cybercr...