Three Objectives of Internal Control are:
Operations
—- Effectiveness and efficiency of operations
Reporting
— Reliability of financial reporting
Compliance
— Compliance with applicable laws and regulations
5 Components of Internal Control are:
Internal controls stop CRIME
Control activities Policies and procedures
Risk assessment process Identification and analysis of relevant risks
Information system Information systems and communication
Monitoring of controls Assessment of control effectiveness over time and corrective actions
Control environment Tone at the top and control consciousness of members
Internal controls provide only reasonable assurance, but not absolute assurance, that an entity’s objectives are met.
Inherent Limitations of Internal Control are:
Human error (e.g., faulty human judgment)
Collusion
Management override
Cost and benefit constraint
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