COSO Internal Control Framework

Lesson Exercise Solution

The Committee of Sponsoring Organizations of the Treadway Commission created a framework to evaluate internal controls.

This framework, often referred to as COSO, lists five components of any internal control system:

Control Environment - The ethical values, integrity, and tone at the top of the organization.
Risk Assessment - The process of identifying and analyzing risks that could prevent the organization from achieving its objectives.
Control Activities - The actions, policies, and procedures that help ensure management directives are carried out.
Information and Communications - The process of identifying, capturing, and communicating relevant information to the right people, at the right time, to support the functioning of internal control.
Monitoring - The process of evaluating the effectiveness of internal control performance over time.

Charlie LLC, a recent audit client, is trying to understand the bill for a recent audit.

Here are the relevant facts:

An auditor noticed that the firm uses use software to check that each sales receipt is complete.

Which component of the COSO framework applies?

This activity is a method of evaluating effectiveness of controls.