Internal Control

Every organization, whether a public entity (governmental) or a private sector entity, should establish and maintain an effective system of internal control. An internal control framework helps an entity to run its operations effectively, report reliable information, and comply with applicable laws and regulations.

Non-federal organizations, both public and private, that receive federal awards are required by the Code of Federal Regulations (CFR) to choose between two models as their framework for an internal control system.

The Internal Control course fully explains both models, which are nicknamed the “Green Book” model and the “COSO” model. (See “Frequently Asked Questions” for more information about the models.) Many examples and scenarios will help you see how to apply the concepts you are learning.

The 5 components of an internal control system.
In the course, you’ll learn the five components of an effective internal control system:

• Control Environment is the foundation of internal control. It includes the culture of the organization, tone at the top, employees with the right knowledge and skills to do their jobs, integrity and accountability.
• Risk Assessment occurs after the organization has defined their strategic and operating objectives. Once these objectives are defined, risks to achieving those objectives are assessed. Risks are then evaluated to determine how to respond to the identified risk. This could be to accept, avoid, reduce or share the risk.
• Control Activities are those actions management takes to respond to identified risk they want to reduce. Control activities are often implemented in the form or policies and procedures.
• Information and Communication involves determining what information is required, assuring data is relevant and from a reliable source, and is properly communicated up, down, and across the organization as well as externally.
• Monitoring Activities involves performing reviews of the internal control structure to ensure it is continuing to operate as intended.

These components, which apply to both models, work together to support an entity's mission, strategies, and related objectives.

Each component consists of required principles.
The course reviews 17 principles that are associated with the five components. The components and the principles constitute the mandatory elements needed for effective internal control. You’ll gain understanding of how these elements work together, and the potential implications if they are no operating together.

Characteristics add depth to each principle.
While the five components and 17 principles are mostly common to both models, there are also key differences.

• For the Green Book model, you’ll review the attributes of each principle. Attributes are characteristics that explain principles in greater detail.
• For the COSO model, you’ll review important characteristics, called points of focus, which underlie each principle.

By completing Internal Control, you will gain knowledge and skills that will help you understand the concepts of an effective internal control system.

You will learn:

• The definition of “internal control” and the five components of an effective internal control system
• The seventeen principles that support the five components
• The Green Book attributes that provide additional information regarding the principles
• The COSO points of focus that provide additional information regarding the principles
• The importance of the five components and relevant principles to be present and functioning
• The importance of the five components operating together

This dynamic, NASBA-approved course consists of 13 lessons and Course Review:

1. Internal Control Introduction
2. Control Environment (the Green Book)
3. Risk Assessment (the Green Book)
4. Control Activities (the Green Book)
5. Information and Communication (the Green Book)
6. Monitoring (the Green Book)
7. A Review of the COSO Model of Internal Control
8. Control Environment (COSO)
9. Risk Assessment (COSO)
10. Control Activities (COSO)
11. Information and Communication (COSO)
12. Monitoring Activities (COSO)
13. Operating Together in an Integrated Manner

Course Review – The purpose of this course review is to revisit the two models or integrated systems of Internal Control. The material compares the two models — the Green Book and COSO.