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Financial statement risk assessment following the COSO framework

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Purpose – The purpose of this paper is to teach students the fundamental and most critical aspects of
performing a financial statement risk assessment, a skill vital to help ensure both auditor and
public-company compliance with guidance found in the Sarbanes-Oxley Act of 2002 (SOX), the SEC’s
Interpretative Guidance regarding Management’s Report on Internal Control over Financial Reporting,
the control deficiency evaluation framework found in Auditing Standard No. 5 (AS5) of the Public
Company Accounting Oversight Board (PCAOB), and the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
Design/methodology/approach – This instructional case study helps students assess the impact
of a set of hypothetical internal control deficiency risks in various industries, including inherent and
residual financial statement risk assessment, and concludes with determining which identified internal
control weaknesses are significant deficiencies and material weaknesses in internal control. Included
in the financial statement residual risk assessment process are example entity-level and process-level
controls described in COSO. Learning objectives, implementation guidance, and the efficacy of using
the case study in the undergraduate or graduate auditing or accounting information systems courses
are also provided.
Findings – The results of classroom testing of the case study at two universities provides evidence
the case study increases student understanding of the implications of internal controls and their
impact on the reliability of the financial statements significantly. Students also found the case to be
challenging, interesting, relevant, clear, understandable, and a realistic approximation of what they
might expect to encounter in the real-world when performing a financial statement risk assessment.
Originality/value – The case study includes the development of skills important to students in
performing financial statement risk assessments, either as an auditor or when working in a private
industry environment, including making professional judgments related to risk assessment.

KeywordsUnited States ofAmerica, Financial reporting, Risk assessment, Sarbanes-Oxley, Accounting,
Information systems, Financial statement risk assessment, Entity-level controls, Process-level controls,
Internal controls

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Ketersediaan

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Informasi Detail

Judul Seri

International Journal of Accounting and Information Management

No. Panggil

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Penerbit

: Emerald Group., 2011

Deskripsi Fisik

International Journal of Accounting and Information Management Vol. 20 No. 1, 2012 pp. 26-48

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

AKUNTANSI

Info Detail Spesifik

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Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

Lampiran Berkas

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