he financial records and accounts are sufficiently reliable for reporting and management purposes, and of compliance with applicable laws and regulations. Management of the business is responsible for the design and operation of the accounting, reporting and internal control systems of the business--the independent auditors may express an opinion on various aspects of the business's systems, but management remains responsible for those systems. Internal control can only provide reasonable assurance of achieving the business's internal control objectives--internal control can be breached by unintentional noncompliance or neglect, management override, intentional noncompliance, or collusion.
             The American Institute of Certified Public Accountants Statements on Auditing Standards recently adopted the definition and description of internal control contained in the report of the Committee of Sponsoring Organizations of the Treadway Commission (the COSO report). Internal control is comprised of five primary components: control environment, risk assessment, control activities, information and communication, and monitoring.
             Control environment primarily relates to the enterprise's politics, management philosophy, structure, method of assigning authority and responsibility, and operating style. From an accounting point of view, the optimum enterprise environment is one in which management and employees are knowledgeable and exhibit honesty and integrity; there is a regular flow of information both up and down the corporate structure; teamwork is emphasized at all levels; employees receive regular evaluation, education and training, have access to and consult with necessary resources, use good judgment, are properly supervised, complimented, or rewarded when appropriate and warranted and commensurately compensated; voluntary recognition of mistakes is encouraged and considered part of the solution process; employees are fairly reprimanded in ...