On Tuesday, the Committee of SponsoringOrganizations of the Treadway Commission (COSO) released anupdated version of its Internal Control—IntegratedFramework. COSO was formed in 1985 by the AAA, AICPA, FEI, IIA, and IMA to provide thoughtleadership in three areas: enterprise risk management, internalcontrols, and fraud deterrence. The organization released itsoriginal internal controls framework in 1992. This week's update isthe first revision to that document, and it represents two and ahalf years of work by COSO and by PwC, which authored the newframework under the direction of the COSO board.

The COSO Framework is designed to be applied companywide, and itcan help managers maintain controls over a wide swath of treasuryand finance functions. “When people think of controls, they thinkof general ledgers and external financial reporting, but theFramework is intended to be applied broadly,” says DavidLandsittel, chairman of COSO. “We articulate three overallobjectives that companies can apply controls to—reporting,compliance, and operations objectives—and there's overlap betweenthem. In the treasury function, certainly there needs to be controlover hedging or trading. Depending on the nature of theorganization, that might be an operational control, but it mighthave financial reporting implications as well.”

Across the three objectives, the COSO Framework presents fivekey components of internal controls: the control environment, riskassessment, control activities, information and communication, andmonitoring activities. In the latest iteration of the Framework,the core objectives and components remain unchanged from the 1992version, but this version adds a list of principles associated witheach component. The idea is that an organization which abides bythese principles can ensure that its internal controlsinfrastructure meets the standards of the Framework.

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