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COSO 2013 Internal Control Framework Released- Supercedes 92 Framework in 2014, Used for Sarbanes-Oxley Assertions

Earlier today, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its 2013 Internal Control-Integrated Framework. The 2013 framework will supercede COSO's 1992 internal control framework in 2014, and COSO provides transition guidance for disclosures when public assertions are made (e.g., for purposes of Sarbanes-Oxley Section 404) referencing COSO during the interim period.

COSO 2013 Features 17 Principles, Additional Pts of Focus, Illustrations, Examples
COSO 2013 features a principles-based approach centered around 17 principles that will look familiar to those who had read COSO's earlier guidance for Smaller Public Companies, which was the first time COSO further articulated its 5 core components of internal control from its landmark 1992 framework, into a set of 'principles.' Although the principles in COSO 2013 are not identical to those in the small business framework, they were a reference point for discussion as COSO in updating the 1992 framework for companies of all sizes, as COSO launched this project as it approached the 20th anniversary of the 1992 framework in 2012.

COSO 2013 includes updates reflecting changes in the world of technology that have taken place during the past 20 years, as well as the inclusion of the 17 principles, and continues to carry forward the 5 core components of internal control from the original 1992 framework, which in and of themselves were considered very principles-based throughout their decades of use.

The new COSO framework released today includes three main volumes available for purchase (with a 4th volume, an Executive Summary, added into purchased packages; the Executive Summary may also be downloaded as a standalone document for free, as explained further below). 
  • Internal Control-Integrated Framework ("IC-IF") - Framework and Appendices, (aka "the Framework")
  • IC-IF: Illustrative Tools for Assessing Effectiveness of a System of Internal Control, and
  •  IC-IF:  A Compendium of Approaches and Examples
FAQs, Executive Summary, Powerpoint Posted by COSO Helpful for Quick Study
Although the core framework itself, and the accompanying illustrative tools for assessing the effectiveness of a system of internal control and compendium of approaches and examples amount to quite weighty documents (substantively and literally!) COSO has posted a number of items today, available via free download, which provide helpful 'quick studies' for you to begin to get up to speed with some of the broad points in COSO's new guidance. These include COSO 2013: 
FEI Issues Statement, Launches COSO Conference Series To Educate Members & The Public

FEI President and CEO and COSO Board Member Marie Hollein issued the following statement on the release of the COSO 2013 Internal Control-Integrated Framework:
“The much-anticipated release of COSO’s 2013 Internal Control-Integrated Framework represents the culmination of more than two years of concerted and coordinated effort among the five sponsoring organizations on the COSO board, of which Financial Executives International (FEI) is proud to be a member. Congratulations to the COSO project task force, which, under the leadership of the COSO chairman, and together with the PwC drafting team, have seen this important project through to completion.” 
FEI’s members, who hold senior-level financial executive positions in many different types of companies and industries, have an important role to play in helping to set the ”tone at the top” of their organizations. This includes not only Sarbanes-Oxley certifications for public companies, which reference the COSO framework, but helping to communicate the release of the new COSO 2013 Internal Control-Integrated Framework to their CEOs through the companion Executive Summary, encouraging communication of the release of the framework throughout their financial function and beginning to consider a project plan for transition from the 1992 COSO framework to COSO 2013.

During the development of COSO 2013, FEI convenened a working group of members who reviewed and commented on the Exposure Drafts released by COSO. Ray Purcell of Pfizer served as Chairman of FEI's Working Group on COSO, and as a member of the COSO Project Task Force along with FEI's COSO Board member, Marie Hollein.

Those in the finance function — or any stakeholder — who would like an early ”deep dive” into COSO 2013, are encouraged to register for one of FEI’s conferences being launched in June, “Principles and Points of Focus: The New COSO Framework.”

Transition Guidance:  

COSO has included the following transition guidance in its press release issued today, as to the timing of when COSO 2013 will supercede COSO '92 and disclosures during the interim period:

COSO believes that users should transition their applications and related documentation to the updated Framework as soon as is feasible under their particular circumstances. As previously announced, COSO will continue to make available its original Framework during the transition period extending to December 15, 2014, after which time COSO will consider it as superseded by the 2013 Framework.     

The COSO Board believes that the continued use of the original Framework during the transition period (May 14, 2013 to December 15, 2014) is appropriate. During this period, the COSO Board believes that organizations reporting externally should clearly disclose whether the original Framework or the 2013 Framework was utilized. COSO will also continue to make available its publication, Internal Control over Financial Reporting–Guidance for Smaller Public Companies until December 15, 2014, after which time it will no longer be available.

Background on COSO; Ordering Copies of COSO 2013
COSO was founded by five sponsoring organizations: the AICPA, AAA,. FEI, IIA, and IMA to further guidance and research focusing on internal control and anti-fraud initiatives, and its mission encompasses internal control as well as enterprise risk management, governance, risk and compliance.

Ordering COSO 2013: As noted in COSO's Press Release, the COSO 2013 framework can be ordered from COSO's website,, under the Guidance tab. Members of COSO's 5 sponsoring organizations (the AICPA, AAA, FEI, IIA and IMA) receive a discounted price; discount codes are available from the respective organizations.  (FEI members: please see last week's, and tomorrow's edition of FEI Executive Express for the discount code, or feel free to contact me directly.) 
Why This is Important
My two cents (please see disclaimer on the right side of this blog): From a practical standpoint, perhaps the single most important reason why the release of COSO 2013 is important to pay attention to, is the fact that the SEC's and PCAOB's rulemaking implementing Sarbanes-Oxley Section 404 (the internal control reports issued by management under Sarbanes-Oxley Section 404(a) and the external auditor under Sarbanes-Oxley Section 404(b) reference the COSO framework as a acceptable framework for purposes of determining the effectiveness of internal control over financial reporting, for purposes of these assertions.

Therefore the release of the COSO 2013 framework, which contains 17 principles and additional points of focus that further explain the principles, and additional updates to COSO's landmark 1992 Internal Control-Integrated Framework, is significant for all those in the financial reporting supply chain and interested constituents or stakeholders.
Posted: 5/14/2013 1:04:21 PM by Edith Orenstein | with 0 comments
Filed under: COSO 2013,FEI COSO conference,internal control,Marie Hollein,Ray Purcell,COSO

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