COSO's control environment includes five basic principles. Presented below are eight conditions noted by the external auditors noted during their consideration of internal control during the risk assessment stage of the audit. Identify the internal control principle that each statement best relates to. (1 points each8 points) Principle A publicly-traded corporation maintains and distributes the company's code of business conduct and ethical standards. It is made available to employees on the company intranet. It is also available to external parties who act on its behalf. There is a separate supplier code of conduct for the company's vendors. This code serves as a partial basis for evaluating vendor product and service delivery The senior management of a software developer has recognized that the company's recent significant growth is causing many of the roles and responsibilities of its management executives to be no longer relevant. In response, the senior managers have initiated a project to realign responsibilities among its leadership team members. The goals are to adequately support financial reporting objectives, with clear lines of reporting supported by newly written job descriptions. In its mission statement, Lopez Industries identifies providing its customers with high-quality, innovative products as a major core value. The company structures its bonus plan to have 40% of the potential incentive award directly related to metrics of customer satisfaction with the quality and features of its products. The audit committee of Hamilton Inc. meets annually in executive session to discuss its assessment of the risks of management override of internal control, including motivations, opportunities, and rationalizations for management override and how those activities might be concealed. It also collects information whenever any concerns are expressed about ethics or possible management override of internal controls. The discussion continues until resolution is reached Bells Inc. conducts scheduled audits to determine whether employees are receiving and understanding the board approved standards of conduct when they are first hired and as part of ongoing communications. This helps to determine if there are any instances of noncompliance and to use those findings to assess and correct any deficiencies in the organization's new hire onboarding process Principle The audit committee of the board is responsible for reviewing the principal roles and responsibilities of key financial reporting senior management. The audit committee meets annually to review the roles, responsibilities, and performance of senion management with the focus on aligning respective managerial responsibilities with the company's organization chart, and the managers' expertise and experience in carrying out their responsibilities. A company that researches, develops, produces, and markets office equipment, encourages its employees to identify and submit suggestions for improving internal control, including internal control over financial reporting. Employees are rewarded in the form of company awards and/or cash bonuses for ideas that are used. The audit committee, the director of internal audit, and the partner from the independent auditor make presentations annually to the board of directors in executive session about the overall quality of the entity's internal control structure and their evaluations of management's performance relative to the design, implementation and maintenance of effective controls. The human resource department coordinates and administers an online activity in which management and employees are required to read the key sections of the company's code of ethics. During the activity, the personnel must acknowledge that they read each section and accept the provisions of each section. A. Control Environmentsets the tone at the top 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 integrity, ethical values and competence of the entity's people; management's philosophy and operating style; the way management assigns authority and responsibility, and organizes and develops its people; and the attention and direction provided by the board of directors. Principle #1: The organization demonstrates a commitment to integrity and ethical values. Code of Conduct that is implemented and enforced Principle #2: The board of directors demonstrates independence from management and exercises oversight of the development and performance of internal control Rely on the internal auditors and the external auditors Principle #3: Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities in the pursuit of objectives Organizational structure Principle #4: The organization demonstrates a commitment to attract, develop and retain competent individuals in alignment with objectives Commitment to Competence and Human Resources Standards Principle #5: The organization holds individuals accountable for their internal control responsibilities in the pursuit of objectives. Implies that the organization will monitor internal control application and report on issues Pervasive effect of Control Environment