Ted is an audit manager with a national public accounting firm and one of his clients is Easy Clean, Co. Easy Clean provides industrial and domestic carpet steam-cleaning services. This is the first time Easy Clean has been audited. Thus, Ted does not have any prior-year audit files to review. Ted recently conducted a preliminary interview with Doug Dosio, who along with his brother, Phil, owns Easy Clean. Ted’s objective for the interview was to establish an understanding of the control environment. 

To prepare for his interview, Ted reviewed professional auditing standards. Auditing standards indicate that the control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. Control environment factors include the following:

. Integrity and ethical values 

. Board of directors

. Management’s philosophy and operating style

. Organizational structure

. Financial reporting competencies

. Authority and responsibility

. Human resources 

REQUIRED 

Using the interview dialogue on the pages that follow, you will be evaluating the seven components of the client’s control environment in order to make an evaluation of the overall internal control environment. To assist you in making this overall assessment, an evaluation form is provided after the interview dialogue and contains detailed descriptions of factors that may weaken or strengthen each of the seven components comprising the overall control environment. Before reading the interview information, please spend a couple of minutes reviewing the assessments you will make. 

After reading the dialogue, you will make the overall assessment labeled, “Overall Evaluation of the Control Environment.” Unless otherwise notified by your instructor, please rate the effect each of the seven components has on the control environment at Easy Clean. When making your judgments, please circle the appropriate number according to the scales provided.