17 Principles of Internal Control

Question 1

What are the 5 principles of the component: Control Environment.

Answer 1

1. Integrity and ethical values.
2. The board of directors demonstrates independence of management, and oversees the development and monitoring of internal control.
3. Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities to achieve objectives.
4. Competence. The org. demonstrates a commitment to attract, develop, and retain competent individuals consistent with achieving organizational objectives.
5. Accountability. The org. holds individual accountable for their internal control responsibilities.

Question 2

What are the 4 principles of the component: Risk Assessment.

Answer 2

1. Objectives. The org. specifies objectives with sufficient clarity to enable the identification and assessment of risks that threaten the achievement of objectives.
2. Assessment. Identify and Analyze risks. Provides basis for determining how the risk should be manage.
3. Fraud. Consider potential for fraud in assessing risk.
4. Change Management. The org. identifies and assesses changes in the external environment, business model and organizational leadership that could impact the system of internal control.

Question 3

What are the 3 principles of the component: Control Activities.

Answer 3

1. Risk Reduction. Org. control activities mitigate the risks to the achievement of objectives to acceptable levels.
2. Technology Controls. The org. selects and implements general controls over technology which support the achievement of its objectives.
3. Policies.

Question 4

What are the 3 principles of the component: Information and Communication.

Answer 4

1. Quality
2. Internal
3. External

Question 5

What are the 2 principles of the component: Monitoring.

Answer 5

1. Ongoing and Periodic

2. Address Deficiencies

Question 6

What are the 4 methods used to monitor internal control?

Answer 6

1. Reviewing
2. Benchmarking Assessments
3. Questionnaires
4. Focus groups and interviews

Question 7

Describe the three core processes of the COSO model of control monitoring.

Answer 7

1. Establish a Foundation (Tone at the top, Organizational structure, Baseline understanding of internal control effectiveness).
2. Design and Execute (Prioritize risks, identify controls, identify persuasive information about controls, and implement monitoring procedures).
3. Asses and report (Prioritize findings, report results to the appropriate levels, and follow up on corrective action).

Question 8

Describe the “Monitoring for Change Continuum”

Answer 8

Establish control baseline
Identify changes
Manage changes
Revalidate control baseline