COSO’s Internal Control Integrated Framework Accounting, Finance Essay

COSO’S Internal Control Integrated Framework
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COSO’S Internal Control Integrated Framework
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) comprises representatives from the American Accounting Association, Financial Executive International, American Institute of Certified Public Accountants, Institute of Internal Auditors, and Institute Management Accountants. COSO was first developed in 1992, and changes were made in 2013 (Graham, 2015).  They created a model of establishing, assessing, and enhancing internal controls adopted as a generally accepted framework for assessing internal control and measuring its effectiveness. Internal control is a process designed by management and finance professionals to provide reasonable assurance on operational efficiency and effectiveness, financial reporting, and compliance with applicable legislation and laws.
The COSO Integrated Framework for Internal Control has five elements: control environment, risk assessment, control activities, information, and monitoring(Graham, 2015).  Internal Control over Financial Reporting are models that address any risks of misstatements in financial statements and reports. The following are connected with financial reporting.
1. The Control Environment
That entails a set of structures, standards, and processes that establishes the ground for implementing internal controls within the firm. The board and top management explains the importance of implementing internal control and expected policy and procedures. Senior management reinforces the board of directors' efforts and expectations at all organizational levels (Rubino et al., 2014). The control environment comprises ethical and integrity values, the board of directors’ parameters of undertaking oversight responsibilities, organizational structure, the process of retaining and attracting hardworking and competent professionals, performance measures, and accountability. The results of the control environment have an overall effect on the internal control system. The control environment is tied to financial reporting because the tone at the top in an organization adopts ethical decisions that are significant and reliable to financial reporting (Coyne et al., 2016). Proper controls ensure that the accountant's accountability and integrity in preparing financial statements discourage any misstatements, fraudulent activities, and creative accounting, generating accurate, reliable, and sound financial reports.
2. Risk Assessment
Risk is the possible occurrence of an event which can adversely affect the business. Every organization is faced with several risks that result from internal and external environments. Risk assessment identifies and mitigates risks to meet the organization's goals (Rubino et al., 2014). The chance of achieving those objectives is relative to risk tolerance; hence risk assessment is the prerequisite for determination of the best way to manage risks.
The risk assessment process covers financial reporting goals such as existence and occurrence, rights and obligation, integrity, disclosures, and assessment (Coyne et ...