COSO Internal Control Framework RevisionPosted: September 26, 2011
The COSO Advisory Council met for the fourth time last week. This meeting focused on the first full draft of the revised Internal Control Integrated Framework. Members of the Advisory Council received the draft for review in August and submitted comments to the PwC team that is leading the revision efforts. There were almost 1,400 comments submitted so I think it is safe to say that the Advisory Council and COSO Board are taking the revision very seriously. To set the stage of the public exposure period I want to let you know what is changing, but maybe more importantly what is not changing.
What is not changing:
- The definition of internal control
- The five components of internal control
- The criteria used to assess effectiveness of internal control; and
- The use of judgment in evaluating the effectiveness of systems of internal control
What is changing:
- Codification of the principles (17 Principles and 82 attributes) with universal application for use in developing and evaluating the effectiveness of internal control systems
- Expanding the financial reporting objective to address internal and external, financial and non-financial reporting
- Increasing the focus on operations, compliance and non-financial reporting objectives based on user input
- Updating the framework for changes in the business environment over the last 20 years.
It should also be noted that while the Internal Control Integrated Framework document will have a increased focus on non-financial reporting objectives, the COSO Board recognizes the importance of the framework for external financial reporting and is therefore planning to release a companion document on Internal Control for External Financial Reporting at the same time it releases the revised framework.
The current plan is to release the exposure draft for public comment on November 15 with and deadline for comments of January 31. I will keep you updated on when this very important exposure draft is released. The COSO Board and Advisory Council are looking forward to receiving your comments on this critical document that is an important building block for every company’s business processes.