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The Control Environment is also called the "tone at the top". It is the personality of the organization as defined by the actions of the board of directors and executive management. Employees will quickly recognize whether the organization's tone is one of integrity or one of fraud & corruption, and soon their actions will mimic those of the executives who should be setting the behavioral examples for all.

The Association of Certified Fraud Examiners (ACFE) recognizes that fraud can be reduced by executive management simply setting the right tone within an organization. Thus, first and foremost, before business processes and computer systems, the Control Environment is the foundation for the integrity of an organization.

The Control Environment consists of both hard controls and soft controls.

Hard controls include authorizations, policies, and the organizational structure of reporting.

Soft controls include ethics, the management style, principles, and values.

This tone, and the hard and soft controls, certainly extends to the internal & external supply chain.

Questions to ask about your internal & external supply chain, whose answers will reflect your organization's tone, include:

Do we treat our suppliers with the same level of honesty and respect as we treat our customers?

Do we enable our employees to speak up and express their concerns, especially in regards to breaches in ethics or policy?

Do we, as executive management, strive to ensure our business practices are not just legal, but more so, ethical?

Are we truly collaborative or more actually combative in our supply chain relationships, both internal & external?

It bears repeating that the Control Environment is the foundation upon which the organization is built and, like any foundation, its integrity is critical to the overall success.