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They produce information used in the internal control system or carry out
activities that put the internal control systems into effect
They inform their managers if they become aware of problems in
operation or that rules or policies are being violated.
INTERNAL CONTROLS - COMPONENTS
•The COSO report, Internal Control – Integrated Framework lists
five interrelated components that make up internal control:
•After the company has identified its entity-level and activity level
risks, it should performa risk analysis:
To estimate the significance of each risk
To assess the likelihood or frequency of each risk’s occurring
To consider how each risk should be managed by assessing
what actions need to be taken.
•Within the control environment management is responsible for
assessment of the risks that the company faces.
•These activities are the policies that are developed to address the
risks of the company, and procedures that ensure the policies will
be followed.
•Handling of Complaints
•Internal controls can help an organization achieve its goals and prevent
loss of resources.
•Internal controls can ensure that the organization complies with laws
and regulations.
•Collusion:
Two or more employees acting together to perpetrate and
conceal an action from detection can often circumvent the most
effective system of internal control.
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