ACCA Strategic Professional · Strategic Business Leader · Management and internal control systems
Karimov Logistics has detailed written procedures, strong authorisation limits and reconciliations. However, the CEO frequently tells staff that hitting delivery targets matters more than following procedures, and managers who bypass controls are praised. Which component of internal control (COSO framework) is most deficient?
The control environment is deficient. Procedures and authorisation limits exist, but the CEO's tone rewards bypassing them, which signals that integrity and compliance are not valued. Tone at the top underpins all other components, so well-designed control activities will be ineffective in practice.
- AControl environmentCorrect
- BControl activities
- CInformation systems
- DMonitoring activities
Explanation
The control environment is the tone at the top, including integrity, ethical values and management philosophy. Here the controls exist (so control activities are designed adequately) but management attitude undermines them. Hence the control environment is the weakest component.
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