What is the difference between entity-level controls and transaction-levelcontrols?

Entity-level controls and transaction-level controls are both important aspects of an organization's internal control system, but they operate at different levels and have different focuses.

1. Entity-Level Controls: These are high-level controls that apply to the organization as a whole. They are designed to create an environment that supports the effective functioning of other controls. Examples of entity-level controls include the organization's code of conduct, management's philosophy and operating style, the way the organization is structured and assigns authority and responsibility, and the processes for managing and developing people in the organization. Entity-level controls are often more qualitative than transaction-level controls.

2. Transaction-Level Controls: These are more specific controls that apply to individual transactions or groups of transactions. They are designed to prevent or detect and correct errors or fraud in the transactions that the organization processes every day. Examples of transaction-level controls include approval of invoices for payment, reconciliation of bank accounts, review of financial reports, and controls over the security of IT systems and data. Transaction-level controls are often more quantitative and detailed than entity-level controls.

In summary, while entity-level controls create a supportive environment for effective internal control, transaction-level controls provide specific checks and balances to prevent or detect and correct errors or fraud in the organization's daily transactions.