Ask FERF (Financial Executives Research Foundation) about...COSO resources. (Resources).The Securities and Exchange Commission (SEC) has responded to Section 404 of the Sarbanes-Oxley Act with proposed rule 33-8138, "Disclosure Required by Sections 404,406 and 407 of the Sarbanes-Oxley Act of 2002." This SEC proposal refers to "the COSO COSO Committee of Sponsoring Organizations of the Treadway Commission COSO Church of Spiral Oak COSO Corporate South COSO Class of Service Override COSO Combat Oriented Supply Operations (USAF) framework." As a result, many FEI FEI Fédération Équestre Internationale. members have asked about COSO and the COSO framework. What is COSO? COSO is the Committee of Sponsoring Organizations. It was formed in 1985 as an alliance of five professional organizations: The American Accounting Association (AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. ), The American Institute of Certified Public Accountants With over 330,525 CPA members (in August 2006), the American Institute of Certified Public Accountants (AICPA) is the largest professional organization of Certified Public Accountants (CPAs) in the United States of America. (AICPA AICPA See American Institute of Certified Public Accountants (AICPA). ), Financial Executives International (FEI), The Institute of Internal Auditors “IIA” redirects here. For IIA in decision theory, see Independence of irrelevant alternatives. Established in 1941, The Institute of Internal Auditors (IIA) is an international professional association of more than 128,000 members with global headquarters in (IIA) and The Institute of Management Accountants The Institute of Management Accountants (IMA) is a professional organization headquartered in Montvale, New Jersey consisting of over 70,000 members worldwide. The IMA is dedicated to advancing the role of the management accountant and financial manager within the business (IMA (Interactive Multimedia Association, Annapolis, MD) An earlier trade association founded in 1988 originally as the Interactive Video Industry Association. It provided an open process for adopting existing technologies and was involved in subjects such as networked services, scripting ). COSO was established to create a single voice in the financial community on issues related to the problem of fraudulent financial reporting. Its stated mission is: COSO is a voluntary private-sector organization dedicated to improving the quality of financial reporting through business ethics, effective internal controls and corporate governance. FERF recently published an Issue Alert, What is COSO? Defining the Alliance That Defined Internal Control, which is available at the FERF bookstore: www.fei.org/rfbookstore/. Fraudulent Financial Reporting In 1985, the National Commission on Fraudulent Financial Reporting, known as the Treadway Commission, was created by the five sponsoring organizations. The Commission issued the Report of the National Commission on Fraudulent Reporting in October 1987. The report was written to study "causal factors that can lead to fraudulent financial reporting," and to identify ways to reduce its incidence. The full report is available at www.coso.org/. Internal Control -- Integrated Framework In 1992, COSO published Internal Control-Integrated Framework to provide a common understanding of internal control, and to assist management in exercising better control over an enterprise. This multi-volume report defines internal control as: "A process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Effectiveness and efficiency of operations, Reliability of financial reporting, Compliance with applicable laws and regulations." Five components of internal control were then identified: * Control environment * Risk assessment * Control activities * Information and communication * Monitoring. An executive summary of the report is available at www.coso.org. The full report may be purchased from www.CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. 2Biz.com. Internal Control Issues In Derivatives In 1996, COSO published Internal Control Issues in Derivatives Usage. This study provided guidelines for understanding the risks associated with the use of financial derivatives. The executive summary is available at www.coso.org/, and the full report is available at CPA2Biz.com. Fraudulent Financial Reporting In 1997, COSO published Fraudulent Financial Reporting: 1987-1997--An Analysis of U.S. Public Companies. The research included examples of fraudulent reporting as alleged by the SEC, and characteristics contributing to fraud, such as lax management or organizational attitudes. The report examined all aspects of fraud, including its perpetrators, the financial impact, and how it is committed. Results showed that in 72 percent of the fraud cases studied, the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. was involved. The average misstatement mis·state tr.v. mis·stat·ed, mis·stat·ing, mis·states To state wrongly or falsely. mis·state  ment n. was $25 million on average assets of $533 million, and the average fraud period extended over nearly 24 months. An executive summary of Fraudulent Financial Reporting: 1987-1997 is available at www.coso.org/. Enterprise Risk Management In January 2001, COSO commissioned its current project, "Enterprise Risk Management: Conceptual Framework," which will offer a guide for developing an enterprise-wide risk management structure. PricewaterhouseCoopers was engaged to lead research that focuses on developing specific programs to identify, measure, prioritize and respond to risks. An exposure draft is scheduled for release later this year. William M. Sinnett (bsinnett@fei.org) is Manager of Research for Financial Executives Research Foundation, Inc. (FERF). |
|
||||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion