Control environment One of the elements of an organization's control system is the "control environment." Identify at least four factors that the auditor should consider when reviewing the control environment and discuss how the auditor would relate this review to the assessment of control risk
The factors that an auditor should consider when reviewing the control environment would include:
• management's philosophy and operating style.
• the entity's organization structure.
• the functioning of the board of directors and its committees.
• methods of assigning authority and responsibility.
• management's control methods for monitoring and following up on performance, including internal auditing.
• personnel policies and practices.
• external influences such as bank regulatory agencies.
The auditor would examine his or her findings relating to each of the listed factors in determining whether control risk was high, medium or low. For example, if the philosophy of management placed little priority on internal controls the auditor would be concerned about control risk.
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