Tempe, September 26, 2017; Technical Staff
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Internal Control
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) defines internal control in its Internal Control - Integrated Framework as:
“Internal control is a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.”
Elements of Internal Control Definition
Internal control
- Is a process. Process means related and interdependent tasks. It is ongoing tasks and activities—a means to an end, not an end in itself. For example, a sales department would approve a credit sales invoice when management already approved dealing with the customer and granted it certain credit terms. The management decision also relied on a due diligence report carried out by another department of the organization.
- Effected by an entity’s board of directors, management, and other personnel. It is the responsibility of those who are charged with governance to establish and maintain systems of internal controls. However, those who are charged with governance should ensure that each member of the organization understands his role and duties with respect to the systems of internal controls.
- Applies to any entity irrespective of its size, industry, geographical location, or legal structure ( for- profit, not-for-profit, and to any governmental unit). It also applies to each department and unit in any entity.
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