Question

What is the significance of assessing risk in the internal control process?

Answer 1

Solution. An organization sets general objective of attaining profit level and to sustain while operating in competitive economic and dynamic environment. It performs internal control process in order to ensure true financial reporting to meet the objectives through the steps of Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring.

Assessing risk facilitates in understanding internal and external environment which possess risks which have negative or adverse affect on the organization and involves generating information for the preparation of corrective steps through decision making to minimize risks and assess risks of material misstatement. It encompasses process of gathering information and communication through management meetings, audit reports, business activities of achieving objectives plans and mapping before the ending of financial year to ensure proper and true financial reporting.