Recognizing the sweeping changes in business, technology, and operating environments over the last 20 years, the respected Committee of Sponsoring Organizations of the Treadway Commission (COSO) has issued an update to its Internal Control — Integrated Framework (1992).
The 2013 update builds on the five components of internal control COSO previously established — Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring Activities. It adds 17 mandatory principles supported by nearly 80 points of focus — all relating to the principles. Companies will need to evaluate which of the points of focus are relevant to their particular business.
The update recognizes the dominating role technology has assumed in the internal control environment in the last two decades as well as control challenges that emerging technology will present. Moreover, COSO has expanded the reporting objectives to encompass both internal and external financial and nonfinancial reporting. There is also expanded guidance on controls relating to outsourced services. COSO recommends that companies using the 1992 framework transition in 2013. By 12.15.14, the old framework will, in effect, be superseded.
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