What is included in the monitoring component of internal control?

The monitoring component of internal control is fundamentally about the ongoing evaluation and oversight of internal control systems to ensure they are functioning as intended. Continuous oversight of control processes involves the regular check-in on the effectiveness and efficiency of these controls, ensuring that they adapt to any changes in the business environment or operational framework. This includes identifying deficiencies in controls and making timely modifications to improve internal control systems.

In contrast, regular evaluations of financial statements, assessments of risk based on market trends, and approvals of financial reporting standards represent functions that can be associated with other components of internal control, such as financial reporting and risk assessment, rather than monitoring specifically. Monitoring is distinct because it focuses not on the outputs of the financial processes but rather on the processes themselves and their ongoing effectiveness.