Internal Control And The Treadway Commission

1452 Words Sep 24th, 2015 6 Pages
What is internal control? Why do we need internal control? The Committee of Sponsoring Organizations of the Treadway Commission (COSO) defines internal control as a process, effected by an entity’s board of directors, management and other personnel, designed to provide “reasonable assurance” regarding the achievement of objectives in these three categories: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations (Reding et al., 2013). Internal control encourage sound management practices and to provide accountability. It neither is one person’s responsibility nor a job that can be done by one person. Internal control is everyone’s responsibility in the organization.
How to achieve effective internal control? It is the million dollars question that every organization wants to ask and knows the answer. Control environment is the first criteria for achieving effective internal control. It is one of the five components of internal control. The other four components of internal control are risk assessment, control activities, information and communication, and monitoring. The control environment of an organization is the attitude/tone set by the management toward internal control and control consciousness maintained by the management and the employee of an organization. Collectively, it is the first building block for the implementation of internal control. Control environment mainly includes the…

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