ACCA Applied Knowledge · Business and Technology · Internal controls
A company's finance director states that the company has a strong control environment. Which of the following most directly forms part of the control environment?
Management's attitude and commitment to integrity, ethics and control, the tone at the top, forms the control environment. Bank reconciliations and storeroom locks are specific control procedures or activities that operate within that environment rather than defining it.
- AA monthly bank reconciliation prepared by the cashier
- BManagement's attitude and commitment to integrity, ethics and control, set by the tone at the topCorrect
- CA lock on the inventory storeroom
Explanation
The control environment is the overall attitude, awareness and actions of directors and management regarding controls, including the tone at the top. A bank reconciliation is a specific control activity, and a storeroom lock is a physical control. Both operate within, but are not the control environment itself.
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