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Governance and Internal Control Essentials

Control is a process implemented by an entity's management and personnel to reasonably ensure the achievement of objectives. It involves setting standards, measuring performance against those standards, and taking corrective action when needed. Control is effected by boards of directors, senior management, managers, and internal and external auditors working together. While control provides reasonable assurance, it cannot guarantee absolute outcomes due to limitations like human judgment and the potential for controls to be overridden or circumvented. Control is designed to help achieve objectives related to operations, reporting, and compliance.

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80 views6 pages

Governance and Internal Control Essentials

Control is a process implemented by an entity's management and personnel to reasonably ensure the achievement of objectives. It involves setting standards, measuring performance against those standards, and taking corrective action when needed. Control is effected by boards of directors, senior management, managers, and internal and external auditors working together. While control provides reasonable assurance, it cannot guarantee absolute outcomes due to limitations like human judgment and the potential for controls to be overridden or circumvented. Control is designed to help achieve objectives related to operations, reporting, and compliance.

Uploaded by

adamazing25
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
  • Chapter 5: Control, Governance and Risk Management

Are interrelated concepts that are fundamental to the field

of internal auditing and the work of internal auditor .


The Institute of Internal Auditors:
Control is the employment of all the means devised in an
enterprise to promote, direct, restrain, govern, and check upon its
various activities for the purpose of seeing that enterprise
objectives are met.

IIA Practice Advisory 2100-1:


Control is any action taken by the management to enhance
the likelihood that established objectives and goals will be
achieved.

The Committee of Sponsoring Organization of the


Treadway Commission (COSO):
Control is a process effected by an entity’s board of directors,
management and other personnel, to provide reasonable assurance
to achieve the objectives.
 Is a voluntary organization dedicated to improving the quality
of financial reporting through business ethics, effective
internal controls, and corporate governance.
 The first chairman of National Commission was James C.
Tradeway, Jr.

1. INTERNAL CONTROL IS A PROCESS


a. Setting standards
b. Measuring Performance
c. Evaluation and Correction
2. INTERNAL CONTROL IS EFFECTED BY PEOPLE
- Board of Directors and Senior Management
- Organazation’s Managers
- Internal and External Auditors
3. Internal Control can be expected to provide REASONABLE
ASSURANCE (due to Limitation of Control ), not absolute
assurance, to an entity’s management and board.

Limitation of Control:
a. Human Judgment.
b. Manual or automated controls can be circumvented by
collusion.
c. Management may inappropriately override internal control.
d. Custom, culture, the corporate governance system, and an
effective control environment are not absolute deterrents to
fraud.
e. Costs should not exceed the benefits of control.
4. INTERNAL CONTROL IS GEARED TO THE ACHIEVEMENT OF
OBJECTIVES IN ONE OR MORE SEPARATE BUT OVERLAPPING
CATEGORIES.
a. Operations Objectives
b. Reporting Objectives
c. Compliance Objectives

The Nature of Control


Control is the process of assuring that plans achieve the
desired objectives and goals.
1. Performance is measured against a standard.
2. Performance is regulated or corrected in light of that
measurement.
PURPOSE OF CONTROL

1. Financial and operational information is reliable and


possesses integrity
2. Operations are performed efficiently and achieve effective
results.
3. Asset are safeguarded
4. Actions and decisions of the organization are in compliance
with laws, regulations, and contracts.

Are interrelated concepts that are fundamental to the field of internal auditing and the work of internal auditor .
The Institute of Internal Auditors: Control is the employment of all the means devised in an enterprise to promote, direct,
Is a voluntary organization dedicated to improving the quality of financial reporting through business ethics, effective i
3. Internal Control can be expected to provide REASONABLE ASSURANCE (due to Limitation of Control ), not absolute assurance
4. INTERNAL CONTROL IS GEARED TO THE ACHIEVEMENT OF OBJECTIVES IN ONE OR MORE SEPARATE BUT OVERLAPPING CATEGORIES. a. Opera
PURPOSE OF CONTROL 1. Financial and operational information is reliable and possesses integrity 2. Operations are performed

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