Intro_to_Internal_Controls

Intro_to_Internal_Controls - Definition and Sample...

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Definition and Sample Components of Internal Control Systems Internal control has been defined as: 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: (a) reliability of financial reporting , (b) effectiveness and efficiency of operations , and (c) compliance with applicable laws and regulations. Five components of internal control are: 1. The control environment comprises the attitudes, abilities, awareness, and actions of an entity's personnel, especially its management, as they affect the overall operation and control of the business. In the words of the National Commission on Fraudulent Financial Reporting (Treadway Commission), it is the "tone at the top." 2. Risk assessment refers to management's process of identifying, analyzing, and managing risks that affect the achievement of its objectives. 3. Control activities are the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives. 4. The information and communication component encompasses the identification and flow of information within an entity in a way that enables people to perform their roles and discharge their responsibilities. 5.
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This note was uploaded on 03/30/2010 for the course BUS-A 100 taught by Professor Tiller during the Spring '08 term at Indiana.

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Intro_to_Internal_Controls - Definition and Sample...

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