The Evolution of the

COSO

Internal Control – Integrated Framework

Presented by:

Anna Song

Chandra Basu

Cyrus BIlimoria

Divina Hale

Agenda

• COSO Internal Control - Integrated Framework

• Five Components of Internal Control

• Why is an internal control framework important

• History of framework

• Necessity of the update

• Compare and contrast

• Value

COSO

Internal Control –

Integrated Framework

1.0 2.0

Five Components of Internal Control

Why is an Internal Control Framework Important?

• Risk

• Improved Organization Performance

• Obtain Key Objectives

What are the 5 components

of Internal Control?

History of the Framework

• 1992

• 2013

• Supporting documents

1992

• Original document

• Five components & three objectives of business

o Operations

o Compliance

o Reporting

2013

• New integrated framework document released

• Included 17 codified principles, 77 points of focus, 3

supporting documents

• Transition date: December 15, 2014

Supporting Documents

• Executive Summary

• Illustrative Tools for Assessing Effectiveness of System of

Internal Controls

• Compendium of Approaches and Examples

Necessity of the Update

• Codified principles

• Increased globalization and automation of enterprises

• Government regulations

Which one of these were NOT key

objectives enterprises seek to

achieve?

A. Governance

B. Compliance

C. Operations

D. Reporting

Compare and Contrast

• Four topics not being changed

• Four topics being changed

Four Topics Not Changed

• Definition of Internal Control

• Five components of internal control

• Criteria used to assess effectiveness

• Use of judgment to evaluate effectiveness

Definition of Internal Control

• Provide a standard

• Assess entities control systems

• Determine how to improve systems

Five Components of Internal Control

Criteria Used to Assess Effectiveness

• Are the five components present and functioning?

• Are the five components working together in an integrated

manner?

Use of Judgment to Evaluate Effectiveness

• Responsibility of management

• Design

• Implement

• Conduct

Four Topics Being Changed

• Update to reflect current business conditions

• Codifying principles and Points of Focus

• Expanding financial reporting

• Increased focus on objectives

Update to Reflect Current Business Conditions

• New technologies

• New opportunities

• New risks

Codifying Principles & Points of Focus

•17 Principles

•Underlying Points of Focus

Expanding Financial Reporting

•Internal financial reporting

•External non-financial reporting

Increased Focus on Objectives

• Operations

• Compliance

• Reporting

How many codified principles for the

COSO Framework are there?

• 17

• 40

• 10

• 100

Value Added and How to Adapt

• Implementation of the 17 principles

• Changes in business

Implementation of the Principles

• Guide for entities

• Points of focus

Tips for Adapting to the New Framework

• Educating Your Employees

• Management, Internal Policy Setters, and Internal

Audit

• How has your experience been?

Summary

• Why is an internal control framework important

• Necessity of the update

• Increased value

Q&A

References

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<http://www.coso.org/documents/cosoicifoutreachdeck_05 18 12.pdf>.

2. Christensen, Brian, Jim DeLoach and Christopher Wright. "The Updated COSO Internal Control Framework Frequently Asked Questions." 2013.

Protiviti Risk and Business Consulting. Internal Audit. PDF. 29 April 2015.

3. "COSO Issues Updated Internal Control-Integrated Framework and Related Illustrative Documents." Www.coso.org. Www.coso.org, 14 May

2013. Web. 28 Apr. 2015. <http://www.coso.org/documents/COSO Framework Release PR May 14 2013 Final PDF.pdf>.

4. "Guidance on Internal Control.” COSO. Web. 1 May 2015. <http://www.coso.org/IC.htm>

5. Harris, Chuck and Lester Geason. "Dataline A look at current financial reporting." 14 May 2013. pwc. PDF. 29 April 2015.

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breach-bigger-than-targets-1411073571>.

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<http://www.cpa2biz.com/AST/Main/CPA2BIZ_Primary/InternalControls/COSO

8. /PRDOVR~PC-990027/PC-990027.jsp>

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a System of Internal Control (3 Volume Set)." Internal Control - Integrated Framework. AICPA. Web. 1 May 2015.

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990025.jsp?cm_vc=PDPZ1#.U430MHbarjI>

11.Martin and Yoakley. “Internal Controls Provide Effective Management Tools.” 1 May 2015.

12.<http://www.pyapc.com/internal-controls-provide-effective-management-tools-for-successful-businesses/>

13.McNally, J. Stephen. "The 2013 COSO Framework & SOX Compliance." 14 May 2013. COSO Committee of Sponsoring Organizations of the

Treadway Commission. PDF. 28 April 2015.

14.McNally, J. Stephen. "The 2013 COSO Framework & SOX Compliance." Www.coso.org. Www.coso.org, 1 June 2013. Web. 2 May 2015.

<http://www.coso.org/documents/COSO McNallyTransition Article-Final COSO Version Proof_5-31-13.pdf>.

15."Non-financial Reporting." 1 July 2009. Web. 2 May 2015. <http://www.ey.com/Publication/vwLUAssets/Non-financial_reporting/$FILE/Climate

change_Non financial reporting.pdf>

16.Stippich, Warren, et al. "Adding internal audit value: Strategically leveraging compliance activities." 2014. GrantThornton. PDF. 28 April 2015.

17.Sustainability Accounting and Reporting. n.d. Web Page. 29 April 2015.

18."The Updated COSO Internal Control Framework." 1 Sept. 2013. Web. 2 May 2015. <http://www.protiviti.com/en-US/Documents/Resource-

Guides/Updated-COSO-Internal-Control-Framework-FAQs-Second-Edition-Protiviti.pdf>.