Question

Kindly explain at least 5 elements of good internal control.

Answer 1

COSO has identified following 5 components of internal control

• Control Environment: the most important of all, this element describes how the company as well its employees take the issue of internal controls in their daily activities. It depicts how is the environment of the company towards internal control
• Risk assessment: It emphasis that company should assess their risk appropriatly and implement controls to prevent or detect fraud
• Control activities: re the policies and procedures that help ensure that management’s directives are carried out
• Information and communication: It means how the information is been extracted from data, how it is assembled, communicated, and saved so that it is not dumped and is available to authorized persons when required
• Monitoing:his component involves understanding how management monitors its controls — and how effective the monitoring is. The best internal controls are worthless if the company doesn’t monitor them and make changes when they aren’t working.