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Components of internal control

A. Control Environment

B. Risk assesment

C. Control activities/procedures

D. Information and communication

Commitment to competence and quality A company's control environment will be more effective if its culture is one in which quality and competence are openly esteemed

Independence, integrity and openness at the board of directors level

Appropriate delegation of authority with accountability.

1. If management effectively assess and responds to risks, the auditor will typically need to accumulate less audit evidence than when management fails to, because control risk is lower

2. A technique to identify risks, involves identifying and prioritizing high risk activies is for example: Identify the principles resources, identify possible liabilities, reviewing the risks that have arisen in the past, between others

1. Sometimes referred to as control activities and sometimes as control procedures, they are those policies and procedures which management has established to achieve the entity's spef¿cific objectives

2. Control procedures entail three fundamental functions which must be separated and adequately supervised: authorization custody and recording.

3. Control procedures are usually considered to fall into five categories: adequate segregation of duties, proper authorization of transactions and activities, physical custody control over assets and records, independent checks on performance and adequate documents and records

1. Information must be identified by management as relevant and delivered to people who need it in a form and time frame that allows them to carry out their control and other responsabilities

The information systemas used by companies, which are primarily CIS includes the accounting system, production system, budget information and others.

The accounting system consists of methods and records established and designed to: identify and record all valid transactions, assets and liabilities, describe the transactions on a timely basis in sufficient detail to permit their proper classification for financial reporting, measure the value of transactions, assets and liabilities in a manner that permits recording their proper monetary value in the financial statements and present the transactions and related disclosures properly in the financial statement