Auditing and Control Environment
Question 3. An Explanation of the Control Environment with Regard to Internal Controls
Control environment is a component of internal control. Control environment is defined by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as the factor of spreading control consciousness of employees of an organization (Tysiak, 2012).
Control environment is considered to be the basis of the other components of internal control: risk assessment, information and communication systems, control activities and monitoring processes (Auditing the control environment: practice guide, 2011).
Control environment includes six elements, according to (Auditing the control environment: practice guide, 2011). The first one is integrity and ethical values of the employees. Management’s philosophy of an entity and its and operating style is the second element The third one is organizational structure of an entity. The next one is the principles of allocation of authority and responsibility. Human Relations policies and practices are also on the list of the elements along with the competence of personnel.
References
Auditing the control environment: practice guide. (2011) (1st ed., pp. 2-3). Retrieved from https://www.iia.org.uk/media/97410/Auditing%20the%20control%20environment.pdf
Tysiak, K. (2012). Internal Control, Revisited. Journal of Accountancy, 213(3), 24-29. Retrieved from …
