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20.20 Control Environment |
20.20.10
July 1, 2017 |
Control environment overview |
The control environment is the set of standards, processes, and structures that provide the foundation for carrying out internal control across the agency. The agency head together with those charged with governance and agency management set the tone at the top regarding the importance of internal control and expected standards of conduct. Management reinforces expectations at all levels of the agency. The control environment has a pervasive impact on the overall system of internal control. |
20.20.20
July 1, 2017 |
Control environment principles |
There are five principles relating to the control environment.
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20.20.30
July 1, 2017 |
Management’s role in the control environment |
Management is very influential in determining the control environment and influencing the control consciousness of agency employees. A system of internal control is likely to function well if management believes that controls are important and communicates that view to employees at all levels. Conversely, a system of internal control is likely to be ineffective if management does not believe the controls are important or if management communicates a negative view of controls to employees. Management influences the control environment through their integrity and ethical values, commitment to competence, philosophy and operating style, design of the organizational structure, assignment of authority and responsibilities, and human resource policies and practices. Management also influences the control environment through communication of the agency’s values and behavioral standards to employees. This can be done by setting a good example, showing a positive attitude toward internal control, displaying and following a formal code of conduct, communicating other agency policies and procedures, taking swift and appropriate disciplinary action in response to policy departure, and maintaining clear and updated job descriptions. |
20.20.40
July 1, 2017 |
Principle 1 – Demonstrates commitment to integrity and ethical values |
The agency head together with those charged with governance and agency management demonstrate commitment to integrity and ethical values. The following points of focus highlight important characteristics relating to this principle:
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20.20.50
July 1, 2017 |
Principle 2 – Exercises oversight responsibility |
Those charged with governance oversee the development and performance of internal control. The following points of focus highlight important characteristics relating to this principle:
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20.20.60
July 1, 2017 |
Principle 3 – Establishes structures, reporting lines, authorities, and responsibilities |
Management establishes structures, reporting lines, and appropriate authorities and responsibilities in pursuit of objectives. The following points of focus highlight important characteristics relating to this principle.
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20.20.70
July 1, 2017 |
Principle 4 – Demonstrates commitment to competence |
Management demonstrates a commitment to attract, develop, and retain competent individuals in alignment with objectives. The following points of focus highlight important characteristics relating to this principle:
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20.20.80
July 1, 2017 |
Principle 5 – Enforces accountability |
Management holds individuals accountable for their internal control responsibilities in the pursuit of objectives. The following points of focus highlight important characteristics relating to this principle:
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