Assertions-Based Standards for Integrated Internal Control

At least 5 parties may demand internal accounting control standards: 1. external auditors, 2. management, 3. audit committees, 4. stockholders, and 5. government and society as a whole. Existing standards only address the external auditor's demands. Under the proposed output-based approach, outsiders determine assertions required of management in order to facilitate investment decision making, corporate accountability, compliance with regulations and agreements, and efficient enforcement of the securities acts. Corporate management then chooses cost-effective controls for its own internal purposes. A proposed model designed to provide a basis for meeting all parties' demands for adequate control encompasses 3 essential and related elements or stages: 1. planning controls, 2. implementation controls, and 3. analytical controls. By regulating outputs or required assertions, flexibility and economy in inputs can be maintained at the firm level.