Management’s Philosophy and Operating Style Background Information expected The delegation of authority for financial Nature of business risks accepted, e.g. whether reporting is important in achieving the management often enters into particularly entity’s financial reporting objectives, in ventures, or is extremely conservative in particular for making the accounting accepting risks. judgements and estimates that enter into Process to establish values and strategy of the financial reporting. Related issues include organisation. reasonableness of accounting policies and Frequency of interaction between senior estimates in connection with preparation of management and operating management, financial statements, especially whether including geographically remote locations. management’s estimates and policies are Roles and responsibilities in the selection of conservative or aggressive (that is, on the accounting principles including management boundary of attitude towards financial reporting e.g. ‘reasonableness’). Management’s attitude toward financial selection of conservative versus liberal reporting also affects the entity’s ability to accounting policies. achieve its financial reporting objectives. Establishment of a financial accounting principles and procedures manual (including e.g. time tables, execution and control of financial tasks). Adequate resources to implement the financial and accounting function(s) in view of adequate financial reporting process. Background Information expected Aspects of an entity’s organisational structure Organisational structure, flows of that are specifically related to financial information to manage activities. Reporting relationships. reporting objectives include factors related to accounting personnel, such as: Process to define key managers’ Appropriateness of reporting lines; responsibilities, and their understanding of Adequacy of staffing and experience these responsibilities. levels; Process to ensure adequacy of knowledge and Clarity of delegation of authority and experience of key managers in light of duties; responsibilities. Extent to which the organisational structure allows accounting personnel to interact with other departments and activities in the organisation, to have access to key data and to properly account for resulting conclusions. Assignment of Authority and Responsibility Background Information expected Deficiencies in the way that authority and Process to assign responsibility and delegate responsibility are assigned to employees in authority to deal with organisational goals and accounting, custodial and asset management objectives, operating functions and regulatory functions may affect the entity’s ability to requirements, including responsibility for achieve its financial reporting objectives. information systems and authorizations for Matters to consider include the adequacy of changes. the work force and whether employees are Existence of control-related standards and deployed to promote segregation of procedures, including employee job incompatible duties. descriptions.
Management’s Philosophy and Operating Style Background Information expected The delegation of authority for financial reporting is important in achieving the entity’s financial reporting objectives, in particular for making the accounting judgements and estimates that enter into financial reporting. Related issues include reasonableness of accounting policies and estimates in connection with preparation of financial statements, especially whether management’s estimates and policies are conservative or aggressive (that is, on the boundary of ‘reasonableness’). Management’s attitude toward financial reporting also affects the entity’s ability to achieve its financial reporting objectives. Nature of business risks accepted, e.g. whether management often enters into particularly ventures, or is extremely conservative in accepting risks. Process to establish values and strategy of the organisation. Frequency of interaction between senior management and operating management, including geographically remote locations. Roles and responsibilities in the selection of accounting principles including management attitude towards financial reporting e.g. selection of conservative versus liberal accounting policies. Establishment of a financial accounting principles and procedures manual (including e.g. time tables, execution and control of financial tasks). Adequate resources to implement the financial and accounting function(s) in view of adequate financial reporting process. Background Information expected Aspects of an entity’s organisational structure that are specifically related to financial reporting objectives include factors related to accounting personnel, such as: Appropriateness of reporting lines; Adequacy of staffing and experience levels; Clarity of delegation of authority and duties; Extent to which the organisational structure allows accounting personnel to interact with other departments and activities in the organisation, to have access to key data and to properly account for resulting conclusions. Organisational structure, flows of information to manage activities. Reporting relationships. Process to define key managers’ responsibilities, and their understanding of these responsibilities. Process to ensure adequacy of knowledge and experience of key managers in light of responsibilities. Assignment of Authority and Responsibility Background Information expected Deficiencies in the way that authority and responsibility are assigned to employees in accounting, custodial and asset management functions may affect the entity’s ability to achieve its financial reporting objectives. Matters to consider include the adequacy of the work force and whether employees are deployed to promote segregation of incompatible duties. Process to assign responsibility and delegate authority to deal with organisational goals and objectives, operating functions and regulatory requirements, including responsibility for information systems and authorizations for changes. Existence of control-related standards and procedures, including employee job descriptions.
10-internal-control-and-risk-management-disclosures.docx