Common use of Control Environment Clause in Contracts

Control Environment. The control environment consists of the structures, processes and standards established to help carry out the internal control process. It includes management and governance functions, and the tone, awareness and actions of those in upper-level management positions. Expectations are set here, and values are inculcated throughout an organization. The strength of the internal control environment is influenced by many factors including organizational values and history, management philosophy and operating style, organizational structure or configuration, assignment of authority and responsibility, and employee expertise and proficiency. Risk assessment identifies and analyzes the risk factors that imperil an organization’s ability to achieve its objective of accurate financial information. These may include errors, violation of policy, fraud, or noncompliance. Risk assessment is an ongoing process of identification and analysis. Control activities are the policies and procedures that help ensure that management’s directives are carried out in an organization. Some common control activities include performance reviews, authorization, physical controls, and segregation of duties.