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Also known as an internal control environment, a control environment is the atmosphere that is created and maintained as part of the ongoing operation of a business or other type of project. The creation of the environment involves implementing policies and procedures that allow the day-to-day operations of the company to perform at the highest degree of efficiency possible. Along with the implementation and enforcement of those procedures, attention to details like the management styles employed by supervisors and managers and the methods used to convey the company mission and goals also make up a part of the control environment.
Within a control environment, mechanisms are put in place that make it possible to continually audit or evaluate the productivity of the business operation. A common component of this internal audit is known as production and efficiency monitoring, a process that makes it possible to determine if specific polices and procedures are empowering employees to meet production goals, or in some way hindering their progress. When policies are supporting production, attention is focused on making sure that employees are following those policies consistently. Should the procedures appear to be flawed in some manner, the task is to refine or replace those activities with procedures that enhance productivity rather than preventing employees from achieving optimum efficiency.
In order for a control environment to be created and to function for any appreciable period of time, a system of checks and balances must be part of the process. Doing so makes it possible to constantly adapt the company operation to changing circumstances without causing any harm to the day-to-day function. This includes allowing for the introduction of new managers who may have styles that are different from previous managers, being open to suggestions from employees on how to improve the production process, and in general creating an environment that allows for the free exchange of information between all parties who are invested in the ongoing success of the company.
When a control environment is functioning properly, issues that could undermine the operation are identified and resolved with relatively little loss of time or resources. While maintenance of the company is a key goal of this type of environment, spurring growth is also an important part of the process. By constantly looking for ways to improve things as well as involving everyone in the process, the chances of the control environment achieving both these goals is greatly enhanced.