Entity-Level Controls: A Powerful Weapon to Prevent and Detect Errors and Fraud
Perhaps the most difficult, yet impactful, aspect of controls is what are commonly referred to as ‘entity-level’ or ‘soft-controls.’ This includes four of the five components to COSO's Internal Control – Integrated Framework:
These are difficult areas to design controls and even more difficult to test the effectiveness of these controls. This is because you often can’t touch or readily see an audit trail of these controls as opposed to more traditional accounting and reporting controls known as ‘hard-controls’ or ‘control activities.’
For example, ‘tone-at-the-top’ is a commonly used term to define management's leadership and commitment towards openness, honesty, integrity, and ethical behavior. It is the most important aspect of the control environment component. The tone-at-the-top has a trickle-down effect on all employees and even external stakeholder groups, such as vendors and creditors. If the tone set by management upholds honesty, integrity and ethics, employees are more likely to uphold those same values and external stakeholders will view the organization as more credible. This training session helps attendees understand that the topic of soft controls is not simply a compliance or audit exercise, but instead the essence of leadership defined by ethical boundaries. It is the informal reality of the organization (i.e., the shared understanding of "how things really work around here") irrespective of formal rules and policies. There is no single more important concept for any organization. Attendees at all levels of management and across all departments are encouraged to attend.
Training objectives are to provide a deeper understanding of: