Question

In: Accounting

The warehouse supervisor is explaining the procedures for documenting inventory transfers to his subordinate. Which of...

The warehouse supervisor is explaining the procedures for documenting inventory transfers to his subordinate. Which of the 2013 COSO IC framework components is this?

Select one:

a. Control activities

b. Control environment

c. Monitoring

d. Information and communication

Solutions

Expert Solution

a. Control activities

As per COSO, Contol actvities are actions (generally described in policies, procedures and standards) that help managemnt mitigate risks in order to ensure the achievement of objectives.

Objectives of Internal Control under COSO framework:

  • Operational effectiveness and efficiency
  • Financial reporting reliability
  • Applicable laws and regulations compliance

COSO framework identifies 17 principles for effective internal control. Out of these, three principles are relevant for Control activities.

  • The organization select and develops control activties to mitigate risks
  • The organization select and develops technology controls
  • The organization deploys control activities through policies and procedures

Procedures for documenting inventory transfers involve

  • Developing control activity that documents inventory transfers to have effective and efficient inventrory control as well as assisting in achieving reliable financial reporting
  • Standardising the control activity of documenting inventory transfers through defined procedures

Both of these satisfy the principles of control activities, hence it is part of contol activities component of COSO IC Framework, 2013.

Other Components are not relevant in deciding the component for documenting invoice transfers. Other components dealt with different issues.

  • Control Environment - Dealt with Integrity, ethics, accountability and responsibility, oorganization structure.
  • Monitoring - Dealt with monitoring, evaluations and reporting of deficiencies.
  • Informmation and Communication - Dealt with the measurement of quality of information and effectiveness of communication.

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