WHAT ARE THE COMPONENTS AND PRINCIPLES OF INTERNAL CONTROL?


COMPONENTS AND PRINCIPLES OF INTERNAL CONTROL


Internal control consists of five interrelated components and seventeen principles that link to all the four objectives of internal control (i.e. accountability, compliance, operations, and safeguarding resources) and are applicable at all levels of the organisation (i.e. organisation- level, departmental-level, unit etc).


WHAT ARE THE COMPONENTS AND PRINCIPLES OF INTERNAL CONTROL?



Table below presents a summary of the components and principles of internal control:



Components and Principles of Internal Control (COSO, 2013)

Component
Principles

1.   Control environment: A set of standards, processes and structures that provide the basis for carrying out internal control across the organisation

1.   Integrity and ethical values.
2.   Independency.
3.   Structure, authorities and responsibilities.
4.   Competent personnel and human resources policies.
5.   Accountability.

2.   Risk assessment: on-going process of identifying all relevant risks to the achievement of entity’s objectives, forming a basis for determining how risks should be management.

6.   Specifying objectives.
7.   Risk assessment.
8.   Potential for fraud.
9.   Assessment of changes.

3.   Control activities: Policies and procedures established to help ensure that management’s directives to manage risks and achievement of objectives are carried out.

10. Selection and development of control activities.
11. General control over technologies.
12. Policies and procedures.

4.   Information and communication: identification, capture or generation and use of relevant and quality information from both internal and external sources.

13. Relevant and quality information.
14. Internal communication.
15. External communication.

5.   Monitoring activities: Involves assessing whether each of the five components of internal control is present and functioning

16. On-going/ or separate monitoring.
17. Reporting internal control deficiencies.

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