History Of COSO

Brief history of COSO

The Committee of the Sponsoring Organizations of Treadway Commission (COSO) was established by five private organizations in the United States. COSO is devoted to monitor the executive management and to control entities on the relevant features of the organizational leadership, the internal controls, the business ethics, internal control, the risk management, the financial reporting and the fraudulent activities. COSO has come up with an internal control model in which the companies and other organizations can evaluate their individual control systems.

The COSO and the Sarbanes-Oxley are related in that the Sarbanes-Oxley requires companies to use the framework that was set by COSO. United States in their efforts to comply

Though the framework assumes that all the 17 principles are applicable in each company, the management can determine the principle which is not applicable, centered on its exceptional circumstances.

The five components of the COSO framework include; the risk assessment, the control environment, the information and communication, the control objectives and the monitoring activities.

The COSO framework has 17 principles of the effective internal control which are aligned to each of the five components:

Risk assessment

1. The business specifies its objectives with adequate transparency in order to enable easy identification and the valuation of the risks associated with the objectives.

2. The business recognizes the risks that affect the accomplishment of its objectives throughout the body and then analyzes the risks as a source for the determination of how they would be

The organization generates and then utilizes the relevant, superior information in order to support the working of the internal control.

11. The organization interconnects information within it, comprising the objectives and the tasks for the internal control which are essential to sustain the working of the internal control.

12. The organization communicates with the outside parties concerning the matters which affect the roles of the internal controls.

Control objectives

13. The organization normally selects and then improves the control activities which contribute to the modification of the risks to the accomplishment of the objectives to the satisfactory levels. 14. The organization chooses and improves the overall control activities over the technology in order to support the accomplishment of objectives. 15. The organization organizes the control activities through the guidelines which institute what is expected and the techniques which put the policies into achievement.

Monitoring activities

16. The organization chooses, develops and then accomplishes the ongoing and the distinct evaluations in order to determine whether the constituents of the internal control are existing and