COSO Launches Plan to Modernize Internal Control Framework
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) announced in November that it will review and update its landmark Internal Control – Integrated Framework. First published in 1992, the framework has been supplemented by various publications, including those geared toward small public companies and the monitoring of internal controls.
Since its creation, the framework has been widely accepted as an internal control standard for organizations implementing and evaluating internal controls related to operations, compliance and financial reporting objectives. More recently, it has been applied to internal control over financial reporting in compliance with the U.S. Sarbanes-Oxley Act of 2002 (SOX) and similar regulatory requirements in other countries.
“Organizations can continue to apply the current framework, inasmuch as its basic components are timeless, but the more detailed guidance and examples are somewhat dated,” said David Landsittel, COSO chairman, in a press release issued by the organization. “This project is not intended to change how internal control is defined, assessed or managed but rather [to] provide more comprehensive and relevant conceptual guidance and practical examples.”
Expected to make the existing framework and related evaluation tools more relevant in an increasingly complex business environment, the initiative is anticipated to allow organizations to better design, implement and assess internal controls. Further, certain concepts and guidance will be refined to reflect the evolution of the operating environment, as well as shifting expectations of regulators and other stakeholders. Enhancements are also expected to consider ways to enrich guidance on operations and compliance objectives.
PricewaterhouseCoopers (PwC) has been selected to coordinate this project under the guidance of an advisory committee consisting of COSO board members and other experts, who will provide leadership and direction in developing the updated framework. To help ensure a broad representation of perspectives, COSO is also forming an advisory council comprised of representatives from industry, academia, government agencies and not-for-profit organizations to provide input as the project progresses.
“The updated framework is intended to help organizations more effectively design and manage internal control,” said PwC’s Miles Everson, the project team leader. “Additionally, it will further explain the interconnections with the Enterprise Risk Management – Integrated Framework, the 2006 Internal Control over Financial Reporting – Guidance for Smaller Public Companies and the2009 Guidance on Monitoring Internal Control Systems.”
Financial Executives International (FEI) will also form an interdisciplinary task force to review drafts of the COSO project, draft comment letters and support FEI’s COSO board members involved in the project.
The updated framework will be available for public comment to ensure the capture of additional input from the general public and is expected to be finalized in 2012.
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