ACC M115 Lecture Notes - Lecture 16: Internal Control, Financial Statement, Risk Assessment
Document Summary
Internal controls increase efficiency and effectiveness of operations, reduce risk of asset loss, help ensure the reliability of financial statements and help ensure compliance with laws and regulations. Internal control can only provide reasonable assurance rather than absolute assurance to management and the board of directors regarding the achievement of an entity"s objectives. Internal control consists of the following five interrelated components: control environment. Integrity, ethical values and competence of the entity"s people. The way management assigns authority and responsibility, and organises and develops its people. The attention and direction provided by the board of directors: risk assessment. The identification and analysis of relevant risks to achievement of the objectives, forming a basis for determining how the risks should be managed: control activities. Help ensure that necessary actions are taken to address risks to achievement of the entity"s objectives. Approvals, authorisations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties: information and communication.
