Within the challenging and ever-changing environment surrounding entities, the importance of obtaining a clean audit opinion through the adherence to a strong governance framework, the implementation of effective internal controls, and compliance with evolving regulatory requirements has never been greater. To mitigate an entity’s inherent risks, while providing reasonable assurance that effective internal controls are in place, management needs to adapt by clearly understanding their entity’s environment while incorporating a go-forward strategy to enhance their entity’s operations through entity-level controls (ELCs).
ELCs are internal controls that pervasively impact an entity's environment and operations, which may consist of the following five components: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring. The entity can demonstrate to internal and external users that their goals and objectives have been met by designing, implementing, and maintaining effective ELCs. All five components are intertwined to create a holistic approach to establish an effective internal control framework and support financial reporting assertions.