Smaller COSO
Just out of curiosity, I seached for articles discussing about pros and cons of the Guidance for Smaller Public Companies drafted and put up at the COSO website in October 2005.
The new guidance outlines 26 fundamental principles associated with the five key components of internal control: control environment, risk assessment, control activities, information and communication; and monitoring. The report defines each principle and describes its attributes, lists a variety of approaches smaller companies can use to incorporate the principles, and includes real-world examples of how smaller companies have effectively applied the principles
Principles are slightly different from the original guidance.
Well structured wealth of information to anyone working on SOX compliance.
http://www.fei.org/files/spacer.cfm?file_id=1974:FEI
FEI supports the additonal principles in this draft.
Statement by SEC Staff:
Remarks Before the 2005 AICPA National Conference on Current SEC and PCAOB Developments
by
Jennifer M. Burns
http://www.aicpa.org/download/news/2005/Leslie_Murphy_Speech_SEC-PCAOB_Conference.pdf PDF file - read from pg 7 through pg 10.
The draft provides answers by highlighting different approaches that companies have taken adn numerous real-life examples of how other companies have effective implemented effective internal controls. This information should be of tremendrous help to others in doing the same.
And this guidance is not just of value to small public companies-it will be useful to any organization - large or small. public or private.
I agree with the comment above.
ASQ (American Society for Quality) published "negative comments" on the blog.
http://www4.asq.org/cgi-bin/blogs/mt-tb.cgi/42:ASQ
The flawed approach focuses only on one of the three COSO Integrated Framework objectives: reliability of financial reporting. This narrow focus will result in frustrated external auditors and additional company expense for actions that are not value-added. By ignoring the important COSO objective: Effectiveness and efficiency of Operations, this document’s approach is to “do extra” and not integrate financial reporting into the operations.
The document is too prescriptive and verbose as it specifies too many principles, which are neither foundational, nor fundamental essences. The main document content of 122 pages is larger than the 1992 COSO Internal Control-Integrated Framework of 92 pages and this document has a much narrower scope. This confusion will result in larger company expense for external financial consultants.
Operations management can understand Internal Controls from the 1992 COSO document. This document feels like a teacher (PwC) teaching them how to pass the test.
