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    Introduction To Internal Control

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    Christine Ramil Eugenio
    This document defines internal control and its key components. Internal control is a process designed by management to provide reasonable assurance that an entity's objectives are achieved. An entity's objectives are reliability of financial reporting, effectiveness and efficiency of operations, and compliance with laws and regulations. The five components of an internal control system are the control environment, risk assessment, information and communication, control activities, and monitoring. Each component is defined and important elements are described.

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    Introduction To Internal Control

    Uploaded by

    Christine Ramil Eugenio
    36 views13 pages
    This document defines internal control and its key components. Internal control is a process designed by management to provide reasonable assurance that an entity's objectives are achieved. An entity's objectives are reliability of financial reporting, effectiveness and efficiency of operations, and compliance with laws and regulations. The five components of an internal control system are the control environment, risk assessment, information and communication, control activities, and monitoring. Each component is defined and important elements are described.

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    Introduction to Internal Control

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    This document defines internal control and its key components. Internal control is a process designed by management to provide reasonable assurance that an entity's objectives are achieved. An entity's objectives are reliability of financial reporting, effectiveness and efficiency of operations, and compliance with laws and regulations. The five components of an internal control system are the control environment, risk assessment, information and communication, control activities, and monitoring. Each component is defined and important elements are described.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views13 pages

    Introduction To Internal Control

    Uploaded by

    Christine Ramil Eugenio
    This document defines internal control and its key components. Internal control is a process designed by management to provide reasonable assurance that an entity's objectives are achieved. An entity's objectives are reliability of financial reporting, effectiveness and efficiency of operations, and compliance with laws and regulations. The five components of an internal control system are the control environment, risk assessment, information and communication, control activities, and monitoring. Each component is defined and important elements are described.

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    INTRODUCTION

    TO INTERNAL
    CONTROL

    PREPARED BY: MS. IDA


    Internal Control Defined
    It is a process designed and affected by those charged with governance management
    and other personnel to provide reasonable assurance about the achievement of the
    entity's objectives
    Internal Control Defined
    ➔ Process
    ➔ TCWG (Those Charged With Governance)
    ➔ Provide reasonable assurance
    ➔ Achievement of objectives
    THREE CATEGORIES OF ENTITY’S OBJECTIVES
    1. Reliability of financial reporting
    2. Effectiveness & Efficiency of operations
    3. Compliance with laws and regulations
    Components of Internal Control System (CRIME)
    • Control activities

    • Entity’s Risk assessment process

    • Information system

    • Monitoring controls

    • The Control Environment


    THE CONTROL ENVIRONMENT
    Overall attitude, awareness and actions of directors and management regarding the
    Internal Control System

    Includes:

    1. Communication and enforcement of integrity and ethical values


    2. Commitment to competence
    3. Participation by TCWG
    4. Management’s Philosophy and Operating Style
    5. Organizational Structure
    THE CONTROL ENVIRONMENT
    Overall attitude, awareness and actions of directors and management regarding the
    Internal Control System

    Includes:

    6. Assignment of Authority and Responsibility


    7. Human Resources Policies and Procedures
    Entity’s Risk Assessment Process
    Is the identification, analysis, and management of risks pertaining to the preparation
    of financial statements

    Risks arise from:

    ● Changes in operating environment


    ● New Personnel
    ● New or revamped information system
    ● Rapid Growth
    ● New Technology
    Entity’s Risk Assessment Process
    Is the identification, analysis, and management of risks pertaining to the preparation
    of financial statements

    Risks arise from:

    ● New business models, products or activities


    ● Corporate restructuring
    ● Expanded Foreign operations
    ● New Accounting pronouncements
    Information System
    Consists of infrastructure (physical and hardware components), software, people,
    procedures and data.
    Information systems encompasses methods and records that:
    1. identify and record all valid transactions
    2. describe on a timely basis the transactions in sufficient detail to permit proper
    classification of transactions for financial reporting
    3. measure the value of transactions in a manner that permits recording their
    proper monetary value in the financial statements
    4. determine the time period in which trend transactions occur to permit
    recording of transactions in the proper accounting period
    Information System
    Consists of infrastructure (physical and hardware components), software, people,
    procedures and data.

    Information systems encompasses methods and records that:

    5. present properly the transactions and related disclosures in the financial


    statement
    Control Activities
    Are the policies and procedures that help ensure that management directives are
    carried out

    Major Categories of Control Procedures

    ● Performance Review
    ● Information Processing Controls
    ○ Proper Authorization of transactions
    ○ Segregation of Duties
    ○ Adequate documents and records
    ○ Safeguards over access to assets
    ○ Independent checks performance
    ● Physical Controls
    Monitoring Controls
    A process that an entity uses to assess the quality of internal control overtime

    Includes:

    ● Evaluating the design and operation of internal control


    ● Communicating information about strengths and weaknesses
    ● Recommendation of actions to improve internal control

    - END OF DISCUSSION -

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