The Committee of Sponsoring Organizations (COSO) of the Treadway Commission issued the Internal Control - Integrated Framework (COSO Framework) back in 1992, so it was time for an update, to address the current business environment.
Here is a summary of the key changes in the new COSO Framework:
- Fundamental concepts underlying 5 components are integrated and articulated as 17 principles
- Clarifies requirements for effective internal control
- Expands the Financial Reporting category of objectives to Reporting objectives
- Clarifies the role of objective-setting in internal control
- Considers globalization of markets and operations
- Enhances governance concepts
- Considers different business models and organizational structures
- Considers demands and complexities in laws, rules, regulations, and standards
- Considers expectations from competencies and accountabilities
- Reflects the increased relevance of technology
- Enhances consideration of anti-fraud expectations
Going forward, users are encouraged to transition applications and related documentation to the updated Framework as soon as feasible. The updated Framework will supersede the original Framework at the end of the transition period, December 15, 2014. The only statement from the SEC has been that they would defer to the COSO board's determination that the old framework would, in essence, cease to exist after December 15, 2014. During the transition period, where there is mention of the use of the COSO Framework, the version used, should be disclosed.
How do you get started? The first step is to develop individual awareness, expertise, and alignment. Conducting a preliminary impact assessment will give an overview of what changes will need to be made. Once this scope of changes has been determined, it is important to facilitate a broad awareness across the company and to provide training. Next, a COSO transition plan and timeline must be developed and then executed. Even after the changes have been implemented, it is important to stress the benefit of continuous improvement.
Details about the new COSO Framework can be found here. Schneider Downs & Co., Inc. can assist you with implementing the COSO Framework and other internal audit needs. Learn more about our firm’s Internal Audit and Risk Advisory Services practice.
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