ASSESSMENT OF CONTROL ENVIRONMENT.

ASSESSMENT OF CONTROL ENVIRONMENT 1
ASSESSMENT OF CONTROL ENVIRONMENT
By (Name)
Name of the Course
Professor
Name of the School
The City and State
Due Date

ASSESSMENT OF CONTROL ENVIRONMENT 2
Assessment of Control Environment
Cochlear Limited is an international company that deals in the manufacture and sale of
implantable hearing solutions. As a company listed on the Australian Securities Exchange,
Cochlear Limited has significant market capitalism of more than $10 billion. According to the
corporate governance arrangements of Cochlear Limited, there is a likelihood of the potential
reliance which can be put on the overall control environment of the company. As an auditor, one
must assess the reliability of the internal controls of a company so that he can determine the level
to which the analytical should be applied when conducting the audit. This can be done by
obtaining an understanding of the internal control structure of the entity (Knechel and Salterio
2016, p. 71).
Various factors or issues lead to a high likelihood of reliance on the overall control
environment of Cochlear Limited. For instance, owing to the significance of the movements of
foreign exchange, the non-IFRS financial measure has not been reviewed by the previous
auditors. The auditor usually undertakes various procedures to confirm that the non-IFRS rules
that were disclosed in the financial statements of the company were correct (Knechel and
Salterio 2016, p. 73).
Besides, Cochlear Limited mitigates its exposure to credit risk by putting in place robust
policies and procedures for the management and administration of credit and accounts
receivables. The company monitors customer credit risk by evaluating the aging profile of the
total balances of receivables and also reporting significant debtors monthly. Furthermore,
Cochlear has a clear strategy for reducing and managing operational risks. For instance, it has
strict policies that encourage segregation of duties and the independent authorization of business
transactions, which helps identify and prevent fraud and errors (William, Glover and Prawitt