INTERNAL CONTROL ENVIRONMENT
In accounting and auditing, internal control is defined as a process effected
by an organisation’s structure, work and authority flows, people and management
information systems, designed to assist the organisation to accomplish specific
goals or objectives. The COSO report further states that internal control is a
means whereby an entity’s board or senior management obtains reasonable
assurance of the achievements of the set objectives. COSO maintains that the
strength or weakness of an entity’s internal control environment rests on what
is called “the foundations of the internal control”, namely; integrity, ethical
values and the competence on the part of the personnel. The availability of the
logistics stated above are described as the invisible control environment.
Essentially, internal controls are process and people-driven and the people’s
`mind-set‘ could make or mar its effectiveness.
The IT environment is similar to this notion of effective internal control. While
this environment recognises people-oriented controls as postulated by COSO,
it also ensures that computer applications used in running the business of the
entity has adequate controls so as to create the necessary assurance of integrity,
reliability and accuracy of processing.
COSO states that `internal control’ has five components, just as in IT
environment, listed as follows:
(a) Control Environment - sets the tone for the organisation, influencing the
control consciousness of its people. It is the foundation for all other
components of internal control.
(b) Risk Assessment - the identification and analysis of relevant risks to the
achievement of objectives, forming a basis for how the risks should be
managed.
(c) Information and Communication - systems or processes that support
the identification, capture, and exchange of information in a form and
time frame that enable people to carry out their responsibilities.
(d) Control Activities - the policies and procedures that help ensure
management directives are carried out.
(e) Monitoring - processes used to assess the quality of internal control
performance over time.
0 komentar:
Post a Comment