Control Environment: The control environment refers to the attitude of the management and staff of the company regarding the internal control report. This keeps the check on their behavior whether the members of the staff and management take the measures of the internal control report seriously or they just pretend to take these seriously, i.e., ignoring them. This is the basis of the other elements of the internal control system including the moral values, the honesty of the employees; managerial skills, etc., are included in this element of internal control.
Risk Assessment: Once all the objectives of an organization are decided the next step of the business organization is to assess the risk involved in the business. There are two types of risks involved in the business, namely, internal risks and internal risks.
Control Activities: The next element of the internal control report is the control activity which is established by the management to prevent the risks related to the objectives of the business organization. This controlling activity includes all the policies and measures to be followed in an organization. The measures of these activities are- o Preparation and use of all the documents of the business o Segregation of responsibility in an organization o Proper delegation of power to the related employees o Independent control over these activities in the business, and o Adopting various securities measures to protect the properties.
Information and Communication: In any business organization, the management needs to take important decisions for which all the relevant information is collected and reported in the given time period. The sources from which this information is collected can be internal or external sources. Communication on the other hand is a very vital source for achieving all the objectives of the business. All the employees need to realize that their responsibilities are related to the activities of others. Communication is also very important at the top level where the officials are to communicate with the outside parties like investors and the creditors.
Monitoring: While the internal control report is in practice, the management team of the organization supervises its efficiency and the effectiveness so that at any point in time if any problem arises, it can be handled on its initial stage.
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