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Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation

Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation. Annual Certification of Internal Controls The Internal Audit Department’s Role. The Institute of Internal Auditors Webcast Series on Sarbanes-Oxley Session #2 - March 3, 2003.

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Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation

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  1. Dave Richards, CIA, CPA Director, Internal Auditing FirstEnergy Corporation

  2. Annual Certificationof Internal Controls The Internal AuditDepartment’s Role The Institute of Internal Auditors Webcast Series on Sarbanes-Oxley Session #2 - March 3, 2003

  3. The Webcast Series on Sarbanes-Oxley’s Impact on Internal Auditing • January 28 - Disclosure Controls - Available in online archive and on CD Rom • March 3 - Annual Certification of Internal Controls • April 1 - Coordination of Internal & External Audit Work • April 15 - Looking Ahead to Future Changes Impacting Internal Auditing • Tuesdays from 1:00 - 2:30 p.m. EST

  4. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  5. Requirements (proposed) • Statement of Management’s Responsibilities (establishing & maintaining) • An assessment, at end of the most recent fiscal year • Effectiveness of internal controls • Procedures for financial reporting • Reporting to audit committee & external auditor any significant deficiencies and material weaknesses in the design or operation of internal controls • External auditor attestation

  6. Internal Controls ??? • “A Process,Effected by an Entity’s Board of Directors, Management and Other Personnel, Designed to Provide Reasonable Assurance Regarding the Achievement of Objectives in the Following Categories: • Effectiveness & Efficiency of Operations • Reliability of Financial Reporting • Compliance with Applicable Laws and Regulations.” Source: COSO

  7. Control Components Used to evaluate overall company’s accomplishment of objectives and specific processes’ performance: • Control environment • Risk assessment • Control activities • Information and communications • Monitoring

  8. Management’s Assessment Process designed to provide reasonable assurance: • Transactions properly authorized • Access to assets controlled against unauthorized or improper use • Transactions recorded to • Permit preparation of FS (GAAP) • Maintain accountability of assets • Controls in place to ensure proper reporting for external purposes

  9. Issues • Definition of internal controls? • Financial • Operational • Compliance • What is the level of internal control documentation needed? • How to test & evaluation criteria? • Process or organizational driven? • Requirements for attestation?

  10. Material Weakness • Impact of control structure on preventing • Errors • Fraud • Not detected in • Timely manner • Normal course of work • Material impact on financial statements • Material = influence decisions made based on financial information

  11. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Documentation Tools - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  12. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  13. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  14. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

  15. Agenda 1:00 - 1:10 Introduction & Overview of Annual Certification of Controls - Dave Richards 1:10 - 1:17 Methodology - Sheryl Hildebrand 1:17 - 1:24 Testing the Controls - Gary McGuire 1:24 - 1:30 FDIC Certification Experience - Brian Szabo 1:30 - 1:45 External Auditor Attestation - Gary Stauffer 1:45 - 1:50 Break 1:50 - 2:25 Questions & Answers - Panel 2:25 - 2:30 Concluding Remarks - Dave Richards

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