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Internal Control (Management (Establish and maintain I/C independent issue…
Internal Control
Management
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Reasonable assurance is the highest level of assurance. Means low likelihood that a material misstatement will be detected
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Internal Controls are policies, processes and procedures set by management to achieve the following;
1. Reliability of financial reporting.
2. Efficiency and effectiveness of operation.
3. Compliance with laws and regulations.
4. Safeguarding of assets
Preventive Controls
- Preventive controls are designed to stop, discourage or pre-empt inappropriate
transactions, errors or irregularities before they occur.
- STOP problems from occurring
Detective Controls
- Detective controls are designed to search for.
- Identify errors on a timely basis after they have occurred.
- Detective controls are after-the-fact controls.
- Used to measure the effectiveness of preventive controls.
Corrective Controls
Corrective controls are designed to correct errors or risks and prevent the recurrence of further errors.
Soft and Hard Controls
Soft controls are intangible controls that management emphasizes to direct the organization’s expectations and behaviour.
Hard controls are visible, traditional internal controls such as documented
procedures, reconciliations, formal systems and monitoring outputs.