Document ID: chunk:federal_register_of_legislation:F2016C00028:reg:26:p44
Version: federal_register_of_legislation:F2016C00028
Segment Type: reg
Provision Reference: reg 26 (pt 44/47)
Character Range: 135502–138903

includes the financial reporting system, encompasses methods and records that:

           * Identify and record all valid transactions.

           * Describe on a timely basis the transactions in sufficient detail to permit proper classification of transactions for financial reporting.

           * Measure the value of transactions in a manner that permits recording their proper monetary value in the financial report.

           * Determine the time period in which transactions occurred to permit recording of transactions in the proper accounting period.

           * Present properly the transactions and related disclosures in the financial report.

7.                   The quality of system‑generated information affects management's ability to make appropriate decisions in managing and controlling the entity's activities and to prepare reliable financial reports.

8.                   Communication, which involves providing an understanding of individual roles and responsibilities pertaining to internal control over financial reporting, may take such forms as policy manuals, accounting and financial reporting manuals, and memoranda.  Communication also can be made electronically, orally, and through the actions of management.

Control Activities

9.                   Generally, control activities that may be relevant to an audit may be categorised as policies and procedures that pertain to the following:

           * Performance reviews.  These control activities include reviews and analyses of actual performance versus budgets, forecasts, and prior period performance; relating different sets of data – operating or financial – to one another, together with analyses of the relationships and investigative and corrective actions; comparing internal data with external sources of information; and review of functional or activity performance.

           * Information processing.  The two broad groupings of information systems control activities are application controls, which apply to the processing of individual applications, and general IT‑controls, which are policies and procedures that relate to many applications and support the effective functioning of application controls by helping to ensure the continued proper operation of information systems.  Examples of application controls include checking the arithmetical accuracy of records, maintaining and reviewing accounts and trial balances, automated controls such as edit checks of input data and numerical sequence checks, and manual follow‑up of exception reports.  Examples of general IT‑controls are program change controls, controls that restrict access to programs or data, controls over the implementation of new releases of packaged software applications, and controls over system software that restrict access to or monitor the use of system utilities that could change financial data or records without leaving an audit trail.

           * Physical controls.  Controls that encompass:

                   + The physical security of assets, including adequate safeguards such as secured facilities over access to assets and records.

                   + The authorisation for access to computer programs and data files.

                   + The periodic counting and comparison with amounts shown on control records (for example comparing the results of cash, security and inventory counts