What does internal control over financial reporting mean on the CPA exam?
Internal control over financial reporting. A process designed to provide reasonable assurance regarding the preparation of reliable financial statements. AU-C 940 defines it for nonissuer integrated audits; for issuers the term comes from SOX and SEC Rule 13a-15(f). AU-C 315 instead uses the broader system of internal control.
Defined against AU-C 940.05.
Which CPA exam sections use internal control over financial reporting?
Internal control over financial reporting appears in the ISC section of the CPA exam.
Related terms
- material weakness: A deficiency, or combination of deficiencies, in internal control over financial reporting where there is a reasonable possibility that a material misstatement will not be prevented, or detected and corrected, on a timely basis.
- financial statements: The formal set an entity publishes: balance sheet, income statement, statement of cash flows, statement of changes in equity, and the notes.
- PCAOB standards: The auditing standards that apply to audits of issuers, numbered AS.
- control environment: The governance and management functions and the attitudes, awareness, and actions of those charged with governance and management concerning the entity's system of internal control.
- information-processing control: A control over processing in an IT application or a manual information process that directly addresses a risk to the integrity of information.
- COSO Internal Control - Integrated Framework: The reference model for internal control: five components and seventeen principles, all of which must be present and functioning for control to be effective.