The control environment reflects the overall attitude, awareness, and actions of the board of directors, management, owners, and others concerning the importance of control and its profile in the entity. Seven areas collectively affect the control environment.

• Is integrity valued? What are the ethical values of the company? Is there a code of conduct? Do incentive and compensation programs support ethical behavior?
• Do the audit committee and board of directors oversee accounting policies and practices?
• What is the philosophy of management and operating style? Is there a constructive attitude toward financial reporting? Is there a responsible approach to risk?
• Is the assignment of authority and responsibility appropriately managed?
• Does the company show a commitment to competence? Does it have procedures for ensuring competence, requisite skills, and knowledge for particular jobs?
• Are the human resource policies and procedures adequate to provide sufficient, competent personnel with adequate resources?
• Is the organizational structure clear on who assigns and who accepts authority and responsibility?

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