CHAPTER 6 - CHAPTER 6 6-2 Internal control structure is...

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CHAPTER 6 6-2 Internal control structure is composed of five components: 1. Control Environment : The control environment sets the tone of the organization, influencing the control consciousness of its people. It is the foundation of all other components of internal control, providing discipline and structure. 2. The Entity’s Risk Assessment Process : The process for identifying and responding to business risks and the results thereof. For financial reporting purposes, the entity’s risk assessment process includes how management identifies risks relevant to the preparation of financial statements that are fairly presented in conformity with generally accepted accounting principles, estimates their significance, assesses the likelihood of their occurrence, and decides upon actions to manage them. 3. The Information System and Related Business Processes Relevant to Financial Reporting and Communication : An information system consists of infrastructure (physical and hardware components), software, people, procedures (manual and automated), and data. The information system relevant to the financial reporting objective includes the accounting system and consists
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CHAPTER 6 - CHAPTER 6 6-2 Internal control structure is...

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