Internal Control and Fraud Detection (9 hrs)

Course No. 7014
Format: Online pdf (276 pages).
Prerequisites: None
Advance Preparation:  None
Level: Overview
CPE Credit: 9 hrs.
Field of Study: Auditing
Course expiration:  You have one year from date of purchase to complete the course.
Course Revision Date: November 2024

After completing this course, participants should be able to:

• Identify the functions and limitations of internal control
• Recognize the COSO Framework’s principles of effective internal control
• Identify some common and important control procedures
• Distinguish between the IT general controls and application controls
• Recognize the implication and significance of the Sarbanes-Oxley Act
• Recognize key procedures involved in identifying risks and controls
• Identify key considerations for identifying and evaluating control deficiencies
• Recognize the requirements of management documentation of controls
• Identify factors in assessing the maturity level of a company’s internal control structure
• Identify the audit objectives, scope, and procedures applied to the integrated audit
• Recognize fraud considerations in a financial statement audit
• Identify the most common schemes and fraud symptoms
• Recognize techniques to prevent and detect fraud

Course Introduction

The primary purpose of this course is to spread the word about internal controls and enable more people to combat corporate fraud effectively. The more individuals know about fraud, the less likely they are to be victimized. Despite differences in industry specifics, there are universal principles of fraud risk management relating to prevention, detection, and response. This course offers a framework that can be applied by organizations of all sizes in any sector. The course is divided into four parts:

Part I. Internal Control Fundamentals: Part I provides an overview of the internal control framework and how it relates to the achievement of basic management objectives. For example, it addresses the five components of internal controls outlined in the COSO Framework. It explains some common control procedures and the significance of internal controls over financial reporting. The application of information technology controls is highlighted, as well as the internal control limitations and cost-benefit relationship.

Part II. Management Assessment of Internal Controls:  The Sarbanes–Oxley Act Section 404 requires management’s development and monitoring of procedures and controls for making their required assertion about the adequacy of internal controls over financial reporting, as well as the required attestation by an external auditor of management’s assertion. Statement on Auditing Standards 130 requires the auditor to examine and report directly on the effectiveness of internal control over financial reporting (ICFR). Thus, managers in both public organizations and nonpublic organizations have been increasingly aware of their responsibility for internal controls.

Part II provides practical guidance that helps you design, implement, maintain, and evaluate controls specifically related to accounting and financial reporting. It includes steps on how to identify risks and controls, advice on how to assess the adequacy of controls, a discussion of how to reach a fair assessment, and documentation requirements of effective controls.

Part III. Comprehensive Examination of Financial Statements:  Part III includes requirements and considerations related to performing an audit of ICFR integrated with an audit of financial statements (integrated audit). It highlights the key procedures required by external auditors to attest to management’s disclosures regarding the effectiveness of its internal control, such as audit planning, the use of a top-down approach, assessment of fraud risk, testing controls, and evaluation and communication of deficiencies. It also addresses other matters related to smaller and less complex organizations, management written representations, and the use of the work of others, along with examples of significant deficiencies and material weaknesses.

Although management is not required to adopt the same methodology as the external auditor, there are advantages to using a similar approach. These requirements/procedures explain how the external auditor will review and evaluate management’s assessment process. It is also important if management is going to minimize audit fees by maximizing reliance on management’s internal control testing.

Part IV. Fraud Risk Management: All organizations are subject to fraud risks. Therefore, no discussion of internal controls would be complete without an examination of fraud prevention and detection. Part IV focuses on the causes of fraud, fraud risk factors, some of the more common types of fraud and fraud symptoms, and fraud prevention and detection techniques, along with recent cases of corporate fraud. It explains the differences between forensic accounting and auditing. It also includes the ACFE Fraud Prevention Check-Up to help organizations identify major gaps and fix them before it is too late.