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Five Components of Internal Controls definitions Flashcards

Five Components of Internal Controls definitions
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  • Internal Controls
    Policies and procedures designed to safeguard assets, ensure reliable records, and promote compliance, primarily to prevent fraud.
  • COSO Framework
    A structured system dividing internal controls into five essential components for effective risk management and fraud prevention.
  • Control Environment
    The ethical atmosphere set by management, including organizational structure and codes of conduct, influencing employee behavior.
  • Tone at the Top
    The ethical example set by executives, shaping the honesty and integrity expectations throughout the organization.
  • Organizational Structure
    The arrangement of roles, responsibilities, and authority within a company, impacting how controls are implemented.
  • Code of Conduct
    A formal document outlining expected ethical behavior and standards for employees within an organization.
  • Risk Assessment
    An ongoing process of identifying and evaluating internal and external threats that could exploit weaknesses in controls.
  • Control Activities
    Specific procedures, such as physical safeguards and documentation practices, designed to address identified risks.
  • Physical Controls
    Tangible measures like locks or safes used to protect assets from theft or unauthorized access.
  • Documentation Procedures
    Processes such as using pre-numbered checks to ensure completeness and accuracy in financial records.
  • Separation of Duties
    Dividing responsibilities among multiple people to reduce the risk of errors or fraud by any single individual.
  • Monitoring
    Continuous evaluation to ensure internal controls are functioning as intended and remain effective over time.
  • Information and Communication
    Systems ensuring timely and accurate capture, processing, and sharing of data necessary for effective operations.
  • CRIME Mnemonic
    A memory aid representing the five components: Control Activities, Risk Assessment, Information and Communication, Monitoring, and Environment.