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Management Control System Design (Components (Control Activities Control…

Management Control System Design

Components and Principles

Monitoring Activities

The organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning.

The organization evaluates and communicates internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors, as appropriate.

Control Activities

The organization selects and develops control activities that contribute to the miti- gation of risks to the achievement of objectives to acceptable levels.

The organization selects and develops general control activities over technology to support the achievement of objectives.

The organization deploys control activities through policies that establish what is expected and procedures that put policies into action

Risk Assessment

The organization specifies objectives with sufficient clarity to enable the identifica- tion and assessment of risks relating to objectives.

The organization identifies risks to the achievement of its objectives across the entity and analyzes risks as a basis for determining how the risks should be managed.}

The organization considers the potential for fraud in assessing risks to the achieve- ment of objectives.

The organization identifies and assesses changes that could significantly impact the system of internal control.

Information and Communication

The organization obtains or generates and uses relevant, quality information to support the functioning of internal control.

The organization internally communicates information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control.

The organization communicates with external parties regarding matters affecting the functioning of internal control.

Control Environment

The organization demonstrates a commitment to integrity and ethical values.

The board of directors demonstrates independence from management and exer- cises oversight of the development and performance of internal control.

Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities in the pursuit of objectives.

The organization demonstrates a commitment to attract, develop, and retain com- petent individuals in alignment with objectives.

The organization holds individuals accountable for their internal control responsibili- ties in the pursuit of objectives.