The internal control system is composed of what elements?

The internal control system is indeed composed of control procedures and control environment. Control procedures are the specific policies and practices that ensure the directives of management are carried out effectively. These often include measures such as segregation of duties, authorization processes, reconciliations, and general security measures that protect the organization’s assets and ensure the reliability of financial reporting.

On the other hand, the control environment sets the tone for the organization. It encompasses the overall attitude, awareness, and actions of the management and those charged with governance regarding the importance of internal control and its effective operation. The control environment includes elements such as organizational structure, commitment to competence, ethical values, and the effectiveness of the board of directors.

Together, these elements create a robust internal control system that helps organizations mitigate risks, ensure compliance with laws and regulations, and accomplish their operational objectives.