Coso releases new internal controls paper

Daily news headlines

The Committee of Sponsoring Organizations of the Treadway Commission (Coso) has released a new discussion document designed to help organisations monitor the quality of their internal control systems.

The document, Guidance on Monitoring Internal Control Systems, has been developed by Coso in conjunction with consultancy firm Grant Thornton and seeks to reinforce the guidelines first outlined in the 1992 Coso Framework and the 2006 Guidance.

The document applies to the internal control objectives regarding financial reporting, as well as the objectives related to effective operations and compliance. It also includes the principles of effective internal control over financial reporting developed by Coso in 2006, and emphasises the importance of these principles to all organisations, regardless of size.

The guidance goes on to reiterate the three central elements that affect the efficiency and effectiveness of monitoring processes: the control environment in which monitoring operates; the organisation’s ability to prioritise effective monitoring procedures and devote monitoring resources commensurate with the underlying level of risk; and the organisation’s communication structure and its ability to report results of monitoring, including control weaknesses, to the relevant people in a timely manner.

"This guidance more fully develops the monitoring component of Coso’s Internal Control – Integrated Framework,” said Coso chairman Larry Rittenberg. “The guidance is appropriate for organisations of any size or structure to improve the quality of their internal controls systems for multiple business purposes, but especially those dealing with the reporting requirements under Sarbanes-Oxley, section 404.”

Feedback received on the paper portal will be used to develop an exposure draft, to be released later this year, including tools, case studies and implementation guidance. The final full publication is scheduled for release in the first quarter of 2008.

The consultation period for the paper closes on October 31 and the document itself can be found on the Coso website: www.coso.org.