The control environment sets the tone for the organization and influences how employees conduct their activities and carry out their control responsibilities. The control environment is the foundation for all other components of internal control and provides structure and discipline. The following table will provide some guidance on control environment principals.
|Control environment principle
|Integrity and ethical values
|Management, through its attitudes and actions, demonstrates character, integrity, and ethical values. Sound integrity and ethical values, particularly of top management, are developed and set the standard of conduct for the organization and financial reporting.
|Provide employees with Standard of Conduct (Chapter 330). Also provide method for reporting violations.
|Commitment to competence
|The entity is committed to competence in the requirements of particular jobs and in translating those requirements into knowledge and skills.
|Employee training and Evaluations.
|Attention and oversight including those charged with governance
|The Board of Curators and all employees of the University are actively involved and has significant influence over the entity’s internal control environment and its financial reporting.
|The University policies and procedures, hotline.
|Management’s philosophy and operating style
|Management analyzes the risks and benefits of new ventures, assesses turnover among employees, investigates and resolves improper business practices, views accounting as a means to monitor and control the various activities of the organization, and adopts accounting policies that reflect the economic realities of the business.
|Degree of care taken in understanding policies and procedures related to financial reporting.
|The organizational structure of the University is appropriately designed to promote a sound control environment. Authority and responsibility, appropriate reporting lines, and free flow of information across the University provide unconstrained influence to effectively run the entity and support effective financial reporting.
|Organizational charts reflecting roles and responsibilities. Defined job duties of key employees.
|Manner of assigning authority and responsibility
|The University assigns authority and responsibility to provide a basis for accountability and control.
|Clearly defined responsibilities and authority limits (Segregation of duties)