Question

LO 5-3 5.33 The most important fundamental component of an entity's internal control is a. Effectiveness and efficiency of operations. b. People who operate the control system. c. Reliability of financial reporting. d. Compliance with applicable laws and regulations.

Answer 1

The most important fundamental component of an entity's internal control is: b. People who operate the control system.

Step-by-step explanation:

Internal control helps in achieving the objectives of the organization effectively. Entity's internal control can be described with the help of five components:

i) Control environment

ii) Risk assessment

iii) Control activities

iv) Information and communication

v) Monitoring

Internal control within an organization can be established by integrating manager and employees. People who operate the control system are considered to be most important for entity’s internal control.

Lack of understanding the processes may cause failure of internal control.