Saturday, January 31, 2009

COSO To Release Monitoring Guidance Feb. 4; Seeks New Chair

The following information has been posted on the website of the Committee of Sponsoring Organizations of the Treadway Commission (COSO):

  • COSO is pleased to release the first volume of its monitoring guidance — the Introduction – [to COSO’s Guidance for Monitoring Internal Control Systems]. This business guidance more fully develops the monitoring component of the Internal Control - Integrated Framework to assist companies in ensuring the effectiveness of their financial, operational, and compliance-related internal controls. The entire four-volume set of guidance will be available on February 4, 2009.

The guidance is aimed at helping companies improve - and take credit for, when appropriate - effective monitoring of internal control. It is also aimed at helping companies use monitoring to make the internal control process more efficient as well as effective, and to consider the balance of efficiency and effectiveness holistically, including the level of work performed by management and internal audit and the degree to which the external auditors can rely on that work, based on factors such as the persuasiveness of information gathered in the monitoring process.

Monitoring is one of the five components of internal control identified in COSO's landmark guidance issued in 1992, Internal Control-Integrated Framework, which is still the primary set of guidance on internal control used in the U.S. for purposes of assertions on internal control under Sarbanes-Oxley Section 404 and related references to internal control frameworks in guidance pertaining to private company audits issued by the AICPA.

The other four components of internal control identified by COSO in 1992 are: control environment, risk assessment, control activities, and information and communication. COSO's guidance has been translated into a number of languages at the request of interested parties in other countries. COSO has also issued guidance on Enterprise Risk Management (2004) and Guidance for Smaller Public Companies (2006).

How COSO Develops Its Guidance
COSO was formed in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, an independent private-sector initiative which studied the causal factors that can lead to fraudulent financial reporting. It also developed recommendations for public companies and their independent auditors, for the SEC and other regulators, and for educational institutions.

The five founding sponsoring organizations of COSO are the American Institute of CPAs (AICPA), the American Accounting Association (AAA), Financial Executives International (FEI), the Institute of Internal Auditors (IIA), and the Institute of Management Accountants (IMA). FEI’s representative on the COSO board [during development of COSO's Monitoring guidance 2007-2008] was FEI past president and senior advisor Michael P. Cangemi. Cangemi is the president of Cangemi Company, LLC.

The sponsoring organizations, together with other experts, served on a COSO project task force led by Trent Gazzaway, Manager Partner of Corporate Governance, Grant Thornton LLP. Grant Thornton was chosen by the COSO board to draft the monitoring guidance, under the oversight of the COSO project task force. The COSO board is currently chaired by Prof. Larry E. Rittenberg of the University of Wisconsin.

COSO's strength comes from taking in input from a diverse constituency including its five sponsoring organizations and other experts on its project task forces, and through consideration of comment letters filed on its exposure drafts.

The sponsoring organizations leverage resources from within their own organizations to provide input in the development of the guidance, including participation of their representatives on the COSO board, and other represenatives on the COSO project task force. For example, FEI members from a cross section of companies, large and small, participated on an ad hoc FEI Task Force on Monitoring which closely followed the development of the COSO guidance and submitted comment letters on the precursor Discussion Document and Exposure Draft of the monitoring guidance in 2007 and 2008, respectively. Rick Brounstein, CFO of NewCardio Inc. chaired FEI’s Task Force on Monitoring and represented FEI on COSO's monitoring task force along with Cangemi. Brounstein had previously served on the U.S. Securities and Exchange Commission's Advisory Committee on Smaller Public Companies.

Learn More About The COSO Guidance
Cangemi, Brounstein and Gazzaway provided insights on the upcoming guidance in an article about
COSO in Financial Executive Magazine January 2009.

Grant Thornton and FEI also sponsored a webcast about the then-upcoming monitoring gudiance on Dec. 2, 2008. Over 400 people logged into the webcast, moderated by FEI's Cangemi, during which Grant Thornton's Gazzaway presented key points on the upcoming gudiance. If you missed it, (or if you'd like to hear it again) you can still access the archived GT-FEI 12/2 Webcast on COSO.

In other internal control-related news, see Use Operational Controls to Combat a Down Economy, by Ron Kral of Candela Solutions, published in Wisconsin Technology Network News on January 23. Kral served as a member of FEI's Task Force on Monitoring.

Check back to COSO’s website and FEI’s website on February 4 for more details and information about the full 4 volume set of COSO’s new Guidance on Monitoring Internal Control Systems.

COSO Seeks New Board Chair
In other COSO news, COSO is presently inviting applications for the position of Chairman of the COSO board. The current chair’s – Prof. Larry E. Rittenberg’s – term ended last year and he has agreed to stay on an interim basis during the search for a new chair.

At the present time we are not aware of a specific application deadline for the COSO chair position, but we encourage applicants considering applying to apply soon. If we learn of an application deadline we will update this post.

Further information, including a link to the COSO Board Chair Position Description, is available here.

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Anonymous said...

Hello Edith:

I just wanted to extent a thank you for your participation in the Board... you and FEI were truly significant contributors to the final product...

Thanks again,
Bob Benoit

Limo hire said...

I have to agree with Bob

SEO Company said...

Hi limo hire

What is it that you agree with, l would like to know.

Limo hire said...

I meant l agreed with Bob about the participation of Edith.

SEO Company said...

Sorry Limo hire, l thought you meant something else.