COSO Internal Control Framework
Lesson:
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.
Tango ltd., a recent audit client, is trying to understand the bill for a recent audit.
You've been provided with the following information:
- An auditor noticed that the management team created a fraud department to look for irregularities in financial documents.
Which component of the COSO framework applies?
Answer:
- It is the risk assessment component.
Explanation:
-
These activities help to identify and manage risks.