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NATURE OF
THE ENGAGEMENT
1. The term
“internal control”
Internal control is a
process, affected by the
entity’s top management,
management and other
personnel, designed to
provide reasonable
assurance regarding the
achievement of
objectives.
Objectives are grouped
under the following
categories;
a. Effectiveness
and efficiency of
operations [this
category includes the
main business objectives
such as growth,
profitability,
protection of assets].
b. Reliability of financial
reporting.
c. Compliance with
laws and regulations.
Internal control
consists of following
components which are
closely interrelated;
a. Control
environment
[competence, integrity,
ethical values of human
resources; the way
management organizes and
delegates responsibility
and authority; etc]
b. Risk
assessment
[Identification,
evaluation, management
of internal and external
risks]
c. Control
activities
[Existence and execution
of control policies and
procedures to ensure
actions identified by
management are
effectively carried out.
(i.e. Controls:
management controls,
manual or computerized
preventive or detective
controls)]
d. Information
and communication
[Capture of and flow
within organization of
pertinent information]
e. Continuous
monitoring of internal
control system.
2. Content of
the engagement
In this engagement we
conduct, depending on
the choice of our
client, one or both of
the followings;
a. Evaluation by
adopting specially
designed procedures
of all or some of
internal control
components and reporting
the weaknesses together
with our recommendations
to top management of our
client.
b. Revision or
establishment of
internal control system.
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