The control environment, which is the foundation for the other components of internal control, provides DISCIPLINE and structure by setting the tone of an organization and influencing control consciousness.

Factors to consider in assessing the client’s control environment include:

• Integrity and ETHICAL values, including (1) management’s actions to eliminate or mitigate incentives and temptations on the part of personnel to commit dishonest, illegal, or unethical acts, (2) policy statements, and (3) codes of conduct
• Commitment to COMPETENCE, including management’s consideration of competence levels for specific tasks and how those levels translate into necessary SKILLS and knowledge.
• Board of directors or audit committee participation, including interaction with internal and external (independent) auditors
• Management’s philosophy and operating style, such as management’s attitude and actions regarding financial reporting, as well as management’s approach to TAKING and monitoring risks
• The entity’s organizational structure
• Assignment of authority and responsibility, including fulfilling job responsibilities
• Human resource policies and practices, including those relating to hiring, orientation, training, evaluating, counseling, promoting, and compensating employees

The control environment, which is the foundation for the other components of internal control, provides discipline and structure by setting the tone of an organization and influencing control consciousness.

Factors to consider in assessing the client’s control environment include: