Abstract ABSTRACT: Modeling of the internal control system provides an element of structure and objectivity to the design and evaluation of the system. A model for the design of an internal control system is proposed which minimizes system cost subject to management-set error reduction probability goals for designated error types. The model chooses from a set of preventive controls with given error reduction rates in arriving at the minimum cost solution, and can accommodate multiple combinations of controls and error types, as welt as restrictions on the use of controls. The model is also useful to the external auditor for evaluation purposes, especially since the system is evaluated by error type.
Susan S. Hamlen (Wed,) studied this question.