Appendix A-2
| | | | | COSO Guidance on Monitoring
June 2008
Overview Implementation of the COSO Framework
1. ABC Company has selected the Committee of Sponsoring Organizations (COSO) framework as the guiding framework for internal controls over financial reporting. In relation to the Financial Reporting section of the framework, the framework’s general objectives and guidelines have been mapped to ABC Company’s processes and activities; thus execution of the objectives in the framework should occur naturally as part of ABC Company’s normal activities. 2. The COSO framework includes a number of specific activities that support and reinforce each other. As a set of general principles:
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Control Environment activities set the “tone from the top,” are widely spread, and set the appropriate tone for the organization. These activities are generally monitored and/or tested on an annual basis to demonstrate good enterprise-wide awareness and compliance.
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Widely spread control activities that are related directly to financial integrity and/or fraud prevention are noted as part of the Control Activities and are tested on a regular basis.
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Closely held activities which do not require the same level of widespread execution are listed in Monitoring, Risk Assessment or Information & Communication. Some of these activities are included in the control activities (and, thus, are widely tested), but the majority of them are simply outlined and confirmed as executed on an annual basis.
3. Each section of the COSO framework is summarized, and the key ABC Company activities are outlined after the COSO framework summary.7
7
To conserve space, and to remain focused on the monitoring component, only the Risk Assessment and Monitoring sections of ABC Company’s COSO Usage Document are included in this appendix. Risk Assessment is included due to its direct effect on ABC Company’s monitoring.