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COSO Internal Control Framework Guide

In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) developed an internal control framework that defines internal control as a process designed to provide reasonable assurance of achieving objectives related to operations, financial reporting, and compliance. The COSO model outlines five components of an effective internal control system: control environment, risk assessment, control activities, information and communication, and monitoring. These components work together to establish a foundation for sound internal control within an organization.

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Yvonne Ryss Batuigas Mende
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62 views2 pages

COSO Internal Control Framework Guide

In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) developed an internal control framework that defines internal control as a process designed to provide reasonable assurance of achieving objectives related to operations, financial reporting, and compliance. The COSO model outlines five components of an effective internal control system: control environment, risk assessment, control activities, information and communication, and monitoring. These components work together to establish a foundation for sound internal control within an organization.

Uploaded by

Yvonne Ryss Batuigas Mende
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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In 1992, the Committee of Sponsoring Organizations of the Treadway

Commission (COSO) developed a model for evaluating internal controls. This


model has been adopted as the generally accepted framework for internal control
and is widely recognized as the definitive standard against which organizations
measure the effectiveness of their systems of internal control.

The COSO model defines internal control as a process, effected by an entitys


board of directors, management and other personnel, designed to provide
reasonable assurance of the achievement of objectives in the following
categories:
Effectiveness and efficiency of operations
Reliability of financial reporting
Compliance with applicable laws and regulations
In an effective internal control system, the following five components work to
support the achievement of an entitys mission, strategies and related business
objectives.
1. Control Environment
Integrity and Ethical Values
Commitment to Competence
Board of Directors and Audit Committee
Managements Philosophy and Operating Style
Organizational Structure
Assignment of Authority and Responsibility
Human Resource Policies and Procedures

2. Risk Assessment
Company-wide Objectives
Process-level Objectives
Risk Identification and Analysis
Managing Change

3. Control Activities
Policies and Procedures
Security (Application and Network)
Application Change Management
Business Continuity/Backups
Outsourcing

4. Information and Communication


Quality of Information
Effectiveness of Communication
5. Monitoring
Ongoing Monitoring
Separate Evaluations
Reporting Deficiencies

These components work to establish the foundation for sound internal control
within the company through directed leadership, shared values and a culture that
emphasizes accountability for control. The various risks facing the company are
identified and assessed routinely at all levels and within all functions in the
organization. Control activities and other mechanisms are proactively designed to
address and mitigate the significant risks. Information critical to identifying risks
and meeting business objectives is communicated through established channels
up, down and across the company. The entire system of internal control is
monitored continuously and problems are addressed timely.

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