Definition of Control Self Assessment

Internal controls help a firm prevent operating losses.

A corporation's management establishes internal controls and procedures to ensure that employees abide by laws, regulations and human resources policies when performing tasks. Control self-assessment activities help employees gauge internal control effectiveness.

Control Defined

Internal controls are policies and instructions that top leadership puts into place to prevent losses resulting from computer hardware and software malfunction, employee carelessness, error, fraud and neglect. Functional controls provide appropriate solutions to internal problems. Effective controls instruct personnel on how to perform duties and report problems.

Control Self-Assessment Defined

Senior management usually asks department heads to prepare risk-and-control self-assessment (RCSA) reports at the end of each quarter or year. In an RCSA report, segment chiefs and their subordinates document operating controls and review the effectiveness and functionality of these controls. They also rank control problems as "high," "medium" and "low," depending on the loss expectation.

Importance

Control self-assessment procedures are important because they allow top executives to identify major risks in operating activities and provide proper mitigating plans or corrective measures. These procedures also help management ensure that corporate financial statements are complete, accurate and in line with regulatory guidelines.

References

• Ernst & Young: Evaluating Internal Controls
• Mercer University: Internal Control
• The CPA Journal: The Use of Control Self-Assessment by Independent Auditors