3 Ways the New COSO Framework May Affect Your Business
Over the past 20 years, change seems to come at the speed of light and has had a significant impact on the way businesses operate. Markets have become global, just about every process can now be outsourced and technology has become integrated into the DNA of every business. If anything, changes in rules, regulations and standards have accelerated. Businesses must now satisfy the high expectations of regulators and other stakeholders regarding governance oversight, risk management and the detection and prevention of fraud. All of this change means that stronger internal control practices must be developed to help to grow, as well as protect, the organization.
The new and easier to understand framework will clarify what's needed - and what's not. The new modernized COSO framework will affect businesses in three big ways by:
- Articulating the role of a company when outsourcing. While today's businesses can outsource many activities, they can never outsource responsibility.
- Putting fraud right out in the forefront. A business's control structure must now address issues of fraud directly.
- Highlighting the critical nature of IT. Information technology is a needed component that cannot be avoided in today's business environment. Let's face it, we simply don't use manual ledgers anymore!
CPAs in business, industry and government have a great opportunity to upgrade internal controls and fortify their organizations at a time when new risks and opportunities are multiplying everyday. You’ll want to be aware of the most significant changes to the framework (for example, COSO has identified 17 principles within the five components of internal control), as well as the key steps and dates for transitioning to the new framework and what external auditors will be looking for in the new process. Learn more about the framework.
Bill Schneider, CPA, CGMA, Director - Accounting, AT&T. Bill is responsible for Corporate Accounting Policy, Executive Compensation Accounting & Benefits Finance, serves on the AICPA Council and IFAC Professional Accountant in Business Committee, and was a member of the COSO Advisory Council on the revision of the Internal Control- Integrated Framework.