Question

Internal control is defined as:

a)a process, effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of the objectives related to operations, reporting, and compliance.
b) a process, implemented by management, to ensure the integrity of the entity's management information system.
c) the entity's system to ensure that management and those charged with governance of the entity have quality information for decision making.
d) the entity's system to prevent, or detect and correct, misstatements in the financial statements.

Answer 1

Internal control is a process involving various levels of personnel in an organization designed to ensure operational, reporting, and compliance objectives are met. Corporate governance, including the board of directors, auditors, and external investors, is crucial in maintaining these controls. Lehman Brothers serves as an example of the failure of such controls and governance.

Step-by-step explanation:

Internal control is defined as a process, effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the areas of operations, reporting, and compliance. This includes systems and processes that ensure the integrity of financial records, adherence to policies and regulations, and the efficiency and effectiveness of operations. In the context of corporate governance, the board of directors is the initial layer of oversight. However, auditors and external investors also play a role in governance. In the case of Lehman Brothers, these controls and governance structures failed, leading to the provision of inaccurate financial information to the investors.