Day 48: Control Framework

The Control Environment Overall attitude of management and employees about the importance of controls.
Three factors influencing a company’s control environment include the following:

• Management’s philosophy and operating style
• Management’s philosophy and operating style relates to whether management emphasizes the importance of internal controls.
• The company’s organizational structure
• The business’s organizational structure is the framework for planning and controlling operations.
• The company’s personnel policies
• The business’s personnel policies involve the hiring, training, evaluation, compensation, and promotion of employees.
• In addition, job descriptions, employee codes of ethics, and conflict-of-interest policies are part of the personnel policies.

Risk Assessment
All businesses face risks such as changes in customer requirements, competitive threats, regulatory changes, and changes in economic factors. 

Management should:

• identify such risks,
• analyze their significance, assess their likelihood of occurring,
• and take any necessary actions to minimize them.