BEC Exam Communications Questions & Answers 2024/2025
Lumber Construction is deciding which internal control framework to adopt for the design and operation of its internal control system. Accordingly, the company's senior management would like you to advise them on the COSO internal control f...
Lumber Construction is deciding which internal control framework to adopt for the design and operation
of its internal control system. Accordingly, the company's senior management would like you to advise
them on the COSO internal control framework.
Prepare a memo to senior management describing the following aspects of the framework: its definition
of internal control, its components, and its limitations.
Type your communication in the response area below.
REMINDER: Your response will be graded for technical content and writing skills. Technical content will
be evaluated for information that is helpful to the intended audience and clearly relevant to the issue.
Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in
professional correspondence. Use an appropriate business format with a clear introduction, body, and
conclusion. Do not convey information in the form o - ANSWERSWritten Communication
This memo addresses three aspects of the COSO internal control framework: its definition of internal
control, its components, and its limitations.
The COSO internal control framework defines internal control as "a process, effected by an entity's board
of directors, management, and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives relating to operations, reporting, and compliance."
This definition of internal control reflects five fundamental principles. First, the intent of internal control
is to assist an organization achieve its objectives in one or more of the following categories: operations,
reporting, and compliance. Second, internal control is a process, not a one-time event. Third, internal
control is effected by personnel across various levels of the organization. Fourth, internal control does
not provide absolute assurance that objectives will be achieved. Rather, it provides only reasonable
assurance. Fifth, internal control can be adapted to an organization's structure.
The COSO internal control framework has five components: control environment, risk assessment,
control activities, information and communication, and monitoring. The control environment is the set of
standards, processes, and structures that pervasively affects the system of internal control. Risk
assessment is the process of identifying and assessing the risks to the organization's objectives relating
to operations, reporting, and compliance. Thus, the establishment of objectives is a precondition to risk
assessment. Control activities are the actions effected through policies and procedures that help ensure
that risk assessment is carried out. Information and communication enables the organization to obtain,
generate, use, and communicate information to support its obje
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