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This COSO document contains guidance targeted towards smaller public companies, to help them apply concepts in the 1992 Internal Control – Integrated Framework. The guidance demonstrates the applicability of those concepts to help smaller public companies design and implement internal controls to support the achievement of financial reporting objectives. It highlights 20 key principles of the 1992 framework, providing a principles-based approach to internal control. While targeted toward smaller public companies, the 2006 guidance applies to entities of all sizes and types.
The guidance will be helpful to smaller businesses as they explore cost-benefit approaches to achieve their financial reporting objectives. This guidance contains numerous examples that have been effectively used by smaller business.
This report contains four volumes and includes:
Internal Control over Financial Reporting is available in three format options. Choose the one that best fits your needs:
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Other COSO documents:
Internal Control—Integrated Framework (1992)
Enterprise Risk Management—Integrated Framework (2004)
Guidance on Monitoring Internal Control Systems (2009)
Internal Control over Financial Reporting
Guidance for Smaller Public Companies
Volume I : Executive Summary
June 2006
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992 issued Internal Control – Integrated Framework to help businesses and other entities assess and enhance their internal control systems. Since that time the Framework has been recognized by executives, board members, regulators, standard setters, professional organizations and others as an appropriate comprehensive Framework for internal control.
Also, changes have taken place in the financial reporting and related legal and regulatory
environments. Significantly, the Sarbanes-Oxley Act was enacted into United States law in 2002. Among its provisions, Section 404 requires management of public companies to annually assess and report on the effectiveness of internal control over financial reporting.
With these developments and the passage of time, the Framework nonetheless remains relevant today and is used by management of public companies large and small in complying with Section 404. Many companies, however, have experienced unanticipated costs, with smaller companies facing unique challenges in implementing Section 404.
This document neither replaces nor modifies the Framework, but rather provides guidance on how to apply it. It is directed at smaller public companies – although also usable by large ones – in using the Framework in designing and implementing cost-effective internal control over financial reporting. Although this guidance is designed primarily to help management with establishing and maintaining effective internal control over financial reporting, it also may be useful to management in more efficiently assessing internal control effectiveness, in the context of assessment guidance provided by regulators.
This report is in three volumes. The first consists of this Executive Summary, providing a high level summary for companies’ boards of directors and senior management.
The second provides an overview of internal control over financial reporting in smaller businesses, including descriptions of company characteristics and how they affect internal control, challenges smaller businesses face, and how management can use the Framework. Presented are twenty fundamental principles drawn from the Framework, together with related attributes, approaches and examples of how smaller businesses can apply the principles in a cost-effective manner.
The third contains illustrative tools to assist management in evaluating internal control. Managers may use the illustrative tools in determining whether the company has effectively applied the principles.
It is expected that senior management will find the Executive Summary and Overview chapter of Volume II of particular interest and might refer to certain of the following chapters as needed, and that other managers will use Volumes II and III as a reference source for guidance in those areas of particular need.
Download the full Executive Summary in PDF Format.
http://media.cpa2biz.com/Publication/store/SB_Ex_Summary.pdf
Copyright © 2006 by the Committee of Sponsoring Organizations of the Treadway Commission
January 2007
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