Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p84
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 250636–253910

conditions other than transactions, such as the depreciation and amortisation of assets and changes in the recoverability of assets; and

           * Ensure information required to be disclosed by the applicable financial reporting framework is accumulated, recorded, processed, summarised and appropriately reported in the financial report.

16.               An entity's business processes include the activities designed to:

           * Develop, purchase, produce, sell and distribute an entity's products and services;

           * Ensure compliance with laws and regulations; and

           * Record information, including accounting and financial reporting information.

Business processes result in the transactions that are recorded, processed and reported by the information system.

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

18.               Communication, which involves providing an understanding of individual roles and responsibilities pertaining to the entity's system of internal control, 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.

19.               Communication by the entity of the financial reporting roles and responsibilities and of significant matters relating to financial reporting involves providing an understanding of individual roles and responsibilities pertaining to the entity's system of internal control relevant to financial reporting.  It may include such matters as the extent to which personnel understand how their activities in the information system relate to the work of others and the means of reporting exceptions to an appropriate higher level within the entity.

Control Activities

20.               Controls in the control activities component are identified in accordance with paragraph 26.  Such controls include information processing controls and general IT controls, both of which may be manual or automated in nature.  The greater the extent of automated controls, or controls involving automated aspects, that management uses and relies on in relation to its financial reporting, the more important it may become for the entity to implement general IT controls that address the continued functioning of the automated aspects of information processing controls.  Controls in the control activities component may pertain to the following:

           * Authorisation and approvals.  An authorisation affirms that a transaction is valid (i.e., it represents an actual economic event or is within an entity's policy).  An authorisation typically takes the form of an approval by a higher level of management or of verification and a determination if the transaction is valid.  For example, a supervisor approves an expense report after reviewing whether the expenses seem reasonable and within policy.  An example of an automated approval is when an invoice unit cost is automatically compared with the related purchase order unit cost within a pre-established tolerance level.  Invoices within the tolerance