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Control Environment: Principle 4 Focal Points

Principle 4: Demonstrates Commitment to Competence

It shows how committed the organization is to attracting, developing, and retaining competent individuals according to its objectives.

The following focal points highlight essential features of this principle.

Focus Points:

Creates Policies and Procedures

Policies and procedures reflect expectations for the competency required to support the organization in achieving its objectives.

Policies and procedures: Guidance and behavior at the organization level that reflect the expectations and requirements of investors, regulators, and other stakeholders. They form the basis for defining the competence needed in the organization. They provide the basis for more detailed procedures for evaluating execution and performance and determining corrective measures when necessary. These policies and procedures include:

  • Requirements and their justification (e.g., product safety laws and regulations for the organization)
  • Skills and behaviors required to support internal control (e.g., knowledge of the operation of technology platforms that support business processes)
  • Defined accountability for the performance of critical business functions (e.g., designated and defined custodians for purchasing and their areas of application within the organization)
  • A basis for assessing deficiencies and determining necessary corrective measures (e.g., correcting a process or strengthening the skills of management and other staff).
  • Means of dynamic response to change (e.g., linking to applicable operating procedures to reflect new regulatory requirements, new risks identified, or internal decisions that will change business processes).
  • Evaluates Competencies and Addresses Deficiencies.

The Board of Directors and Management evaluate the level of competency in the organization and external service provider firms in accordance with established policies and procedures and act as necessary to address deficiencies.

Competence is the qualifications required to fulfill assigned responsibilities. These qualities are expressed through individuals’ attitudes, knowledge, and behavior as they carry out their responsibilities.

The organization defines the competency requirements needed to support the achievement of objectives by considering:

  • Required knowledge, skills, and experience,
  • The nature and degree of judgment that must be applied to a particular position and the limits of the authority to be exercised.
  • Benefit-cost analysis of different skill and experience levels.

The board of directors evaluates the competence of the general manager/CEO; Management, on the other hand, considers the competence throughout the organization and in external service provider companies according to the determined policies and procedures and then takes the necessary steps, taking into account any deficiencies or excesses.

Attracts, Nurtures, and Retains Competent Individuals in the Organization

The Organization provides the consultancy and training necessary to attract, train, and retain adequate and competent personnel and external service providers to support the Organization in achieving its objectives.

Management at different levels creates structures and processes to achieve the following:

  • Attracting to the organization: Searching for and finding suitable candidates.
  • Train: Educating individuals to develop competencies appropriate to assigned roles and responsibilities.
  • Guidance: To align the individual’s skills and expertise with the organization’s goals and to help staff adapt to changing and evolving conditions.
  • Evaluate: Measuring the performance of individuals by achieving goals and, exhibiting expected behavior, and measuring external service providers by the terms of the agreement.
  • Retention in the organization: Providing incentives, including training and certification, as appropriate, to motivate and reinforce expected performance levels and desired behaviors.
  • Makes succession (backup) planning and preparation.

Senior Management and the board develop contingency plans to identify significant responsibilities for internal control.

Management constantly identifies and evaluates those who perform functions that are considered essential for the organization to achieve its goals. The importance of each task is determined by assessing its impact if the task had been performed, whether temporarily or permanently.

The General Manager/CEO or other members of senior management, strategic suppliers, or key marketing channel partners are functions that often require succession plans to ensure that objectives can be achieved even in the absence of those who will perform these duties.

Senior management and the board of directors also develop contingency plans to distribute essential responsibilities for internal control.

Succession planning is also done when contractual arrangements transfer essential functions to external service providers.

References for Internal Control Articles

  • International Internal Auditing Standards, International Institute of Internal Auditors
  • Dr. Davut Pehlivanlı, Current Internal Audit Practices, Beta 2010
  • Prof. Dr. Nejat Bozkurt, Accounting Audit, Alfa 1998
  • Prof.Dr.Nejat Bozkurt, TÜRMOB Independent Audit Training Lecture Notes, 2012
  • Dr.Özgür Çatıkkaş, KGK, Marmara University. Corporate Governance Lecture Notes, 2013
  • İSMMMO-Practical Information for Internal Audit in SMEs, 2013
  • Turkish Internal Audit Institute,
  • Alp Buluch, Article, Internal Control, Hurses, 19 March 2013
  • Turkish Commercial Code No. 6102
  • International Internal Auditing Standards,
  • Treadway Commission Supporting Institutions Committee, Internal Control-Integrated Framework, 2013
  • Public Financial Management and Control Law
  • Public Internal Control Standards
  • Public Internal Control Guide

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