Ask FERF (Financial Executives Research Foundation) about...COSO resources. (Resources).
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), The American Institute of Certified Public Accountants (AICPA), Financial Executives International (FEI), The Institute of Internal Auditors (IIA) and The Institute of Management Accountants (IMA).
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
An executive summary of the report is available at www.coso.org. The full report may be purchased from www.CPA2Biz.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 was involved.
The average misstatement 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 (firstname.lastname@example.org) is Manager of Research for Financial Executives Research Foundation, Inc. (FERF).
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Committee of Sponsoring Organizations|
|Author:||Sinnett, William M.|
|Date:||Jul 1, 2003|
|Previous Article:||Creating value through cash savings. (Corporate Trade).|
|Next Article:||Congressional tax agenda: busy and fluid. (Washington Insights).|