Processes of Monitoring Internal Controls

Question 1

Define “control baseline”.

Answer 1

A control assessment in which sufficient, persuasive information supports a reasonable conclusion about control effectiveness, either across the entire organization or in a given area. An appropriate starting point for effective control monitoring.

Question 2

Define “ongoing monitoring”.

Answer 2

Activities to monitor the effectiveness of internal control in the ordinary course of operations.

Question 3

Define “control activities”.

Answer 3

Policies and procedures that help ensure that management directives are carried out. May include approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets, and segregation of duties.

Question 4

Describe information and communication.

Answer 4

The “nerve-center function” of an internal control system. Pertinent information - internal and external - must be identified, captured, and communicated in a form and time frame that enable personnel to carry out their responsibilities.

Question 5

Define “deficiency or internal control deficiency”.

Answer 5

A condition requiring attention. May represent a perceived, potential or real shortcoming, or an opportunity to strengthen the internal control system to provide a greater likelihood of achieving an entity’s objectives.

Question 6

Define “control environment”.

Answer 6

Sets the tone of an organization by influencing the control consciousness of its people. The foundation for all other components of internal control.