The control environment is understood as the control climate that develops or arises in the individual and group conscience of the members of an organization, influenced by the history and culture of the entity and by the guidelines given by top management in reference to integrity and ethical values.
This is true not only in its design, but also in the way it operates in practice, the control environment is affected by the history and culture of the entity. It influences the control consciousness of its people.
Effectively controlled entities strive to have competent people, instill attitudes of integrity and control consciousness throughout the enterprise, and set a positive tone at the top. They establish appropriate policies and procedures, often including a written code of conduct, which encourages the sharing of values and teamwork in the interest of achieving the entity's objectives.
Hence, the control environment establishes the mode of operation in an organization to influence 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; the management's philosophy and style of operation; the way management assigns authority and responsibility, and how it organizes and develops its people; and the attention and direction given by the board of directors.
In short, to the extent that all the organization's operations are carried out in such a way that they achieve the objective for which they were programmed (that they are effective) and use fewer resources (that they are efficient), there is reasonable assurance that the company's objectives will be achieved. Thus, establishing the close relationship that exists between an adequate control environment and the reasonable achievement of the objectives related to this category.