ACT1110

Fundamental Concepts of the

Internal Control System
 a) Explain the definition of Controls and Internal Control
b) Differentiate roles and responsibilities to Risk Management and Internal Control
System

Learning Objectives
 OBJECTIVES CONTROLS
Defined, intended Increase the likelihood of
outcomes achieving objectives

RISKS
Possibility of an event occurring that will have an impact on the
achievement of objectives

GOVERNANCE
Ensure entity effectively and efficiently directs toward meeting the
objectives

Overview
What is control?
 Control
Any action taken by management, the board and other parties to manage risk
and increase the likelihood that established objectives and goals will be achieved.

Direct responsible
Guidance, direction and
oversight
Frontline Personnel – minimum of
what is expected
Auditor– evaluate and monitor

Definition of Terms
 Internal Control
A process effected by an entity’s board of directors, management and other
personnel designed to provide reasonable assurance of the achievement of
objectives.

Definition of Terms
 CoCo Internal Control
Framework
- Guidance on Control (commonly
referred to as CoCo based on its original
title Criteria of Control)
- Published by the Canadian Institute of
Chartered Accountants (CICA)

A person performs a task, guided by an understanding of its purpose (the objective to be achieved) and
supported by capability (information, resources, supplies and skills). The person will need a sense of
commitment to perform the task well over time. The person will monitor his or her performance and the
external environment to learn about how to do the task better and about changes to be made. The same is
true of any team or work group. In any organization of people, the essence of control is purpose,
commitment, capability, and monitoring and learning

Internal Control
Framework
 Turnbull Report
- Guidance on Risk Management, Internal
Control and Related Financial and
Business Reporting
- Published by the Financial Reporting
Council (FRC) of the UK

A report which brings together elements of best practice for risk management; prompt boards to consider
how to discharge their responsibilities in relation to the existing and emerging principal risks faced by the
company; reflect sound business practice, whereby risk management and internal control are embedded in
the business process by which a company pursues its objectives; and highlight related reporting
responsibilities.

Internal Control
Framework
 COBIT 2019 Framework
- Control Objectives for Information and
Related Technology (COBIT)
- Created by ISACA for optimizing
enterprise IT governance (to help
businesses develop, organize and
implement strategies around information
management)

Effective governance over information and technology is critical to business success, and this new release
further cements COBIT’s continuing role as an important driver of innovation and business transformation

Internal Control
Framework
 COSO Internal Control – Integrated
Framework 2013

Internal Control
Framework
 COSO Internal Control – Integrated
Framework 2013
Objectives of Internal Control
- Published by the Committee of Sponsoring
Organizations of the for determining what constitutes
effective internal control. Treadway Commission
(COSO)
- Help​​organizations design and implement internal
control in light of many changes in business and
operating environments, broaden the application of
internal control in addressing operations and
reporting objectives, and clarify the requirements

Internal Control
Framework
 COSO Internal Control – Integrated
Framework 2013
Objectives of Internal Control
A. Operations
- To achieve entity’s mission
- Safeguard of assets

B. Reporting
- Reliable, timely, and transparent financial and
nonfinancial information
- Prepared for use by the organization and stakeholders

C. Compliance
- Laws, rules, and regulations that set minimum
standards of conduct

Internal Control
Framework
Components and Principles
Control Environment
1.Demonstrates commitment to integrity and ethical values
2.Exercises oversight responsibility
3.Establishes structure, authority and responsibility
4.Demonstrates commitment to competence
5.Enforces accountability

6.Specifies suitable objectives

Risk Assessment
7.Identifies and analyzes risk
8.Assesses fraud risk
9.Identifies and analyzes significant change

10.Selects and develops control activities

Control Activities
11. Selects and develops general controls over technology
12.Deploys through policies and procedures

13.Uses relevant information

Information & Communication
14.Communicates internally
15.Communicates externally

Monitoring Activities 16.Conducts ongoing and/or separate evaluations

17.Evaluates and communicates deficiencies

Internal Control
Framework
Components and Principles

Control Environment

Internal Control
Framework
Components and Principles

Risk Assessment

Internal Control
Framework
Components and Principles

Control Activities

Internal Control
Framework
Components and Principles

Information & Communication

Internal Control
Framework
Components and Principles

Monitoring Activities

Internal Control
Framework
Roles and Responsibilities
Practice Question
 The policies and procedures helping to ensure that management
directives are executed and actions are taken to address risks to
achievement of objectives describes
A. Risk assessments
B. Control environments
C. Monitoring
D. Control activities

THE CORRECT
Practice Question ANSWER IS..
 Which of the following control models is fully incorporated into the
broader integrated framework of enterprise risk management
(ERM)?
A. CoCo.
B. COSO.
C. Electronic Systems Assurance and Control.
D. COBIT.

THE CORRECT
Practice Question ANSWER IS..
 Which of the following is the common name for Internal Control:
Guidance for Directors on the Combined Code?
A. CoSO
B. Turnbull Report
C. CoCo
D. COBIT

THE CORRECT
Practice Question ANSWER IS..
 Which of the following are elements of the control environment?
A. Integrity and ethical values
B. Organizational structure
C. Assignment of authority and responsibility
D. All of the answers are correct

THE CORRECT
Practice Question ANSWER IS..
 The COSO framework treats internal control as a process designed
to provide reasonable assurance regarding the achievement of
objectives related to
A. Effectiveness and efficiency of operations
B. Reliability of financial reporting
C. Compliance with applicable laws and regulations
D. All of the answers are correct

THE CORRECT
Practice Question ANSWER IS..
Questions
Thank you