Bus 342 Key Terms Ch. 11

Question	Answer
Application control	Controls specific to a subsystem or an application to ensure the validity, completeness, and accuracy of the transaction
Code of Ethics	A formal expectation on what is considered to be ethical within an organization to promote ethical behavior
Committee of Sponsoring Organization (COSO)	Composed of several organizations (AAA, AICPA, FEI, IIA, and IMA); studies the causal factors that lead to fraudulent financial reporting and develops recommendations for public companies, independent auditors, the SEC and other regulators, and educational institutions to improve the quality of financial reporting through internal controls and corporate governance
Control objectives for information and related technology	An internationally accepted set of best IT security and control practices for IT management released by the IT Governance Institute (ITGI)
Control risk	The threat that errors or irregularities in the underlying transactions will not be prevented, detected, and corrected by the internal control system
Corporate governance	A set of processes and policies in managing an organization with sound ethics to safeguard the interests of its stakeholders
Corrective controls	Fix problems that have been identified, such as using backup files to recover corrupted data
Cost/benefit analysis	Important in determining whether to implement an internal control
Detective controls	Find problems when they arise
Enterprise risk management (ERM)	A process, affected by the entity’s board of directors, management, and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within the risk appetite, to provide reasonable assurance regarding the achievement of objectives
General controls	Pertain to enterprise wide issues such as controls over accessing the network, developing and maintaining applications, and documenting changes of programs
Information Technology Infrastructure Library (ITIL)	A set of concepts and practices for IT service management
Inherent risk	The risk related to the nature of the business activity itself
Input control	Ensure the authorization, entry, and verification of data entering the system
International Organization for Standardization (ISO) 2700 series	This series contains a range of individual standards and documents specifically reserved by ISO for information security
IT application controls	Activities specific to a subsystem’s or an application’s input, processing, and output
IT controls	Involve processes that provide assurance for information and help to mitigate risks associated with the use of technology
IT general controls	Enterprise-level controls over IT
Output controls	Provide output to authorized people and ensure the output is used properly
Manual controls	Mainly manual but could involve the physical use of computing technology
Preventive controls	Deter problems before they arise
Processing controls	Ensure that data and transactions are processed accurately
Public Company Accounting Oversight Board (PCAOB)	Established by SOX to provide independent oversight of public accounting firms
Residual risk	The product of inherent risk and control risk (i.e., Residual risk = Inherent risk × Control risk)
Risk assessment	The process of identifying and analyzing risks systematically to determine the firm’s risk response and control activities
Sarbanes-Oxley Act of 2002 (SOX)	A response to business scandals such as Enron, WorldCom, and Tyco International; requires public companies registered with the SEC and their auditors to annually assess and report on the design and effectiveness of internal control over financial reporting
Control environment	Sets tone of firm, influences control consciousness, and establishes the foundation for internal control

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Bus 342 Key Terms Ch. 11

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