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What Are Entity-Level Controls?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 24 November 2016
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Entity-level controls refer to an assessment of the internal machinery in place in an organization to help shepherd the activities of such an organization toward transparency and the avoidance of acts of fraud or mismanagement. In its application to organizations, entity-level controls serve the function of reinforcing the already established corporate values and ethics through the process of identifying any weaknesses in the application of such principles in the organization. Where any weak links are identified, proper steps will be taken to address the problems.

One of the ways in which entity-level controls benefit an organization is through the identification of potential risk situations or conditions through the judicious application of well-planned and executed entity-level controls. This is due to the fact that through the early identification of such risk conditions, the organization will be able to put in place safeguards that will serve as proactive measures toward warding off such risk situations or as a mitigating factor in the event something like that does occur. If the company has a plan for addressing such risk situations, then it will be not be taken unawares when an instance actually does occur.

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Sometimes companies do not realize that certain risk situations exist in their organization, and this type of control helps them isolate such risks and also establish a solid framework for risk control that will apply to the whole organization. Where there are already some risk-control measures in place in the company, entity-level controls will help the company stay abreast of the latest developments in that industry that might necessitate an updating of the previous risk control measures. In its application to the finances of the company, entity-level controls ensure that there is greater accountability as well as a more strengthened process for the handling of all financial-related activities.

From the foregoing it can be surmised that entity-level controls can also be used as a means of making the organization more efficient in all the departments, not just the financial or accounting departments. This due to the fact that all of the employees and other people related to the organization will be made to understand and abide by the internal controls established through entity-level controls. The application of this type of control is also beneficial, because it is an ongoing process that leads to a constant reevaluation of the risk control measures in place in relation to the control measures that should actually be in place in the organization.

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