Internal control should meet the expectations and needs of organizational management. It is a process that is carefully effected by an organization’s Board of Directors, providing the assurance for achieving aims and objectives of the organization. The COSO framework is the identity measure against which an organization measures its effectiveness of internal control and is widely accepted by many organizations as the main framework for internal control. This process consists of five main components. This report covers the integrated internal control system components, the benefits of the COSO framework and its encouragement to the organizational culture and value systems.
Internal control system consists of five major interrelated components namely; control environment, information system, control activities, entity’s risk assessment process and monitoring of control (Graham, 2015). When an organization has an effective internal control system, these components work to achieve the organization’s mission and strategies. The control environment helps in integrating the organizational ethical values and maintaining its operating style. It consists of the Board of Directors and the Audit Committee. It states human resource policies and procedures and assigns responsibilities to the authority within an organization. The information system component ensures that there is quality and effective information and communication in the organization. Control activities ensure business continuity and security in an organization. It also consists of the policies and procedures of the organization. The risk assessment process manages change and helps in identifying risks and in analyzing them. Monitoring component ensures reporting of deficiencies by doing separate evaluation of the company. These five interrelated components ensure establishment of a foundation for effective control systems in the organization through encouraging efficient leadership and cooperative culture and values that encourage accountable control (Graham, 2015).
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COSO framework should be adapted and implemented by companies because of its various benefits. The framework improves internal business control. This allows an organization to maintain efficient data banks, vital for making sound decisions and enable it to deal with risks appropriately hence improving the overall performance of the organization. COSO framework ensures cyber security of the organization. There have been fraud activities in companies and the COSO framework helps in managing cyber activities and minimizing risks involved. The framework enhances cost efficiency within an organization. Implementation of COSO framework will help in managing compliance cost by coming up with effective internal controls. There will be increased attention from investors since companies that have adopted the framework have better risk management programs in place, hence a better chance for investors’ accommodation ( Moeller, 2014).
COSO framework fosters ethical values and culture within an organization. The framework provides an enabling environment within an organization hence ensuring effective organizational operations. COSO framework ensures that there is effective cooperate management within an organization, which helps in instilling ethical values and a good organizational culture ( Moeller, 2014). It fosters professional conduct within an organization, which is clearly understood at all organizational levels. It provides employees with guidelines on their behavioral conduct while performing their duties and responsibilities in the organization. This enables them to respect their coworkers and show integral values at their workplace. Employees are encouraged to make appropriate decisions and do what is expected given guidance. COSO framework plays a major role in influencing ethical practices and cultural values aligned to the organization’s goals and objectives ( Graham, 2015).
Companies experiencing management risks and risk of cyber-attacks should adapt the COSO framework in their audit internal control system. This will greatly help in risk management by improving their cyber security. The framework will have a major contribution to the enhancement of the organization culture, integrity and ethical values hence improving the overall organizational efficiency. The framework will ensure improvement of the internal control system hence improving the overall performance of the company.
References
Graham, L. (2015). Internal control audit and compliance: Documentation and testing under the new COSO framework.
Moeller, R. (2014). Executive’s guide to COSO internal controls: Understanding and implementing the new framework.
