Accounting Procedures Handbook

4 INTERNAL CONTROL I. OVERVIEW COSO (Committee of Sponsoring Organizations) is an independent private sector organization dedicated to provide thought leadership through the development of comprehensive frameworks and guidance on enterprise risk management, internal control and fraud deterrence designed to improve organizational performance and governance and to reduce the extent of fraud in organizations. COSO was originally established in 1985 to sponsor the National Commission on Fraudulent Financial Reporting (Commission). The Commission analyzed the factors that can contribute to fraudulent financial reporting, and developed recommendations for organizations to limit the potential for such, through greater promotion of business ethics, enhancement of internal controls, and strengthening of corporate governance practices. The Commission contained representatives from industry, public accounting, investment firms, and the New York Stock Exchange, and was jointly sponsored by five major professional associations (known as a whole as COSO) which include: • American Accounting Association • American Institute of Certified Public Accountants • Financial Executives International • Institute of Internal Auditors • Institute of Management Accountants (The Association of Accountants and Financial Professionals in Business) COSO developed an internal control model, Internal Control – Integrated Framework, which was published in 1992, but was revised and reissued in May 2013. The 2013 Framework helps an organization design and implement internal control in light of many changes in business and operating environments. This model has been broadly accepted in the United States (and in other parts of the world) as a primary tool for establishing and evaluating an entity’s internal control structure and activities. Sub-Sections II-IV of this Section, which follows, provides select additional information regarding internal controls and the COSO Internal Control – Integrated Framework. For more detailed information refer to the COSO website at www.coso.org. Internal control is broadly defined as a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance. II. CONTROL OBJECTIVES Per the COSO Internal Control – Integrated Framework Executive Summary: Internal control helps entities achieve important objectives and sustain and improve performance. COSO’s Framework enables organizations to effectively and efficiently develop systems of internal control that adapt to changing business and operating environments, mitigate risks to acceptable levels, and support sound decision making and governance of the organization.