September 2012 Post Public Eposure ersion - Jalisco

1 Committee of Sponsoring Organizations of the Treadway CommissionSeptember 2012 framework and AppendicesInternal control integrated FrameworkCommittee of Sponsoring Organizations of the Treadway CommissionTo submit comments on this Public Exposure Draft, please visit the website. Responses are due by November 16, will be asked to respond to a series of questions. Those questions may be found on-line at and in a separate document provided at the time of download. Respondents may upload letters through this site. Please do not send responses by fax. Written comments on this exposure draft will become part of the Public record and will be available on-line March 31, Public Exposure VersionPost Public Exposure Version 2012 All Rights Reserved.

2 No part of this publication may be reproduced, redistributed, transmitted or displayed in any form or by any means without written permission. For information regarding licensing and reprint permissions please contact the American Institute of Certified Public Accountants, licensing and permissions agent for COSO copyrighted materials. Direct all inquiries to or to AICPA, Attn: Manager, Rights and Permissions, 220 Leigh Farm Rd., Durham, NC 27707. Telephone inquiries may be directed to of Sponsoring Organizations of the Treadway CommissionSeptember 2012 framework and AppendicesInternal control integrated FrameworkCommittee of Sponsoring Organizations of the Treadway CommissionTo submit comments on this Public Exposure Draft, please visit the website.

3 Responses are due by November 16, will be asked to respond to a series of questions. Those questions may be found on-line at and in a separate document provided at the time of download. Respondents may upload letters through this site. Please do not send responses by fax. Written comments on this exposure draft will become part of the Public record and will be available on-line March 31, Public Exposure VersionPost Public Exposure VersionCommittee of Sponsoring Organizations of the Treadway Commission Board Members Representative COSO Chair David L. LandsittelAmerican Accounting Association Mark S. Beasley Douglas F. PrawittThe Institute of internal Auditors Richard F. ChambersAmerican Institute of Certified Public Accountants Charles E.

4 LandesFinancial Executives International Marie N. HolleinInstitute of Management Accountants Sandra Rictermeyer Jeffrey C. Thomson PwCAuthorPrincipal Contributors Miles Everson Engagement Leader New York, USA Stephen E. Soske Project Lead Partner Boston, USA Frank J. Martens Project Lead Director Vancouver, Canada Cara M. Beston Partner San Jose, USA Charles E. Harris Partner Florham Park, USA J. Aaron Garcia Director San Diego, USA Catherine I. Jourdan Director Paris, France Jay A. Posklensky Director Florham Park, USAS allie Jo Perraglia Manager New York, USAPost Public Exposure VersionAdvisory CouncilSponsoring Organizations RepresentativesAudrey A. Gramling Bellarmine University Fr. Raymond J. Treece Endowed ChairSteven E.

5 Jameson Community Trust Bank Executive Vice President and Chief internal Audit & Risk OfficerJ. Stephen McNallyCampbell Soup Company Finance Director/ControllerRay Purcell Pfizer Director of Financial ControlsBill Schneider AT&T Director of AccountingMembers at LargeJennifer BurnsDeloittePartnerJim DeLoach Protiviti Managing DirectorTrent Gazzaway Grant Thornton PartnerCees Klumper The Global Fund to Fight AIDS, Tuberculosis and Malaria Chief Risk OfficerThomas Montminy PwC PartnerAl Paulus E&Y PartnerThomas Ray KPMG PartnerDr. Larry E. RittenbergUniversity of WisconsinEmeritus Professor of Accounting Chair Emeritus COSOKen Vander Wal ISACA PresidentRegulatory Observers and Other ObserversJames Dalkin Government Accountability Office Director in the Financial Management and Assurance TeamHarrison E.

6 Greene, Jr. Federal Deposit Insurance Corporation Assistant Chief AccuntantChristian Peo Securities and Exchange Commission Professional Accounting Fellow (Through June 2012 )Amy SteeleSecurities and Exchange CommissionAssociate Chief Accountant (Commencing July 2012 )Vincent Tophoff International Federation of AccountantsSenior Technical ManagerKeith Wilson Public Company Accounting Oversight Board Deputy Chief AuditorPost Public Exposure VersionAdditional PwC ContributorsJoseph Atkinson Partner New York, USAJ effrey Boyle Partner Tokyo, JapanGlenn BradyPartner St. Louis, USAJ ames Chang Partner Beijing, ChinaMark Cohen Partner San Francisco, USAA ndrew Dahle Partner Chicago, USAM egan Haas Partner Hong Kong, ChinaJunya Hakoda Partner (Retired)Tokyo, JapanDiana Hillier Partner London, EnglandSteve Hirt Partner Boston, USAB rian Kinman Partner St.

7 Louis, USAB arbara Kipp Partner Boston, USAHans Koopmans Partner SingaporeSachin Mandal PartnerFlorham Park, USAAlan Martin Partner Frankfurt, GermanyPat McNameePartner Florham Park, USAJ onathan MullinsPartner (Retired)Dallas, USAS imon Perry Partner London, EnglandAndrew Reinsel Partner Cincinnati, USAK ristin Rivera Partner San Francisco, USAV alerie WiemanPartner Florham Park, USAA lexander Young Partner Toronto, CanadaDavid Albright Principal Washington, , USAC harles Yovino Principal Atlanta, USAEric M. BloeschManaging DirectorPhiladelphia, USAC hristopher Michaelson Director Minneapolis, USALisa Reshaur Director Seattle, USAT racy Walker Director Bangkok, ThailandQiao PanSenior AssociateNew York, USAPost Public Exposure VersionPrefaceThis project was commissioned by COSO, which is dedicated to providing thought lead-ership through the development of comprehensive frameworks and guidance on internal control , enterprise risk management, and fraud deterrence designed to improve organi-zational performance and oversight and to reduce the extent of fraud in organizations.

8 COSO is a private sector initiative, jointly sponsored and funded by: American Accounting Association (AAA) American Institute of Certified Public Accountants (AICPA) Financial Executives International (FEI) Institute of Management Accountants (IMA) The Institute of internal Auditors (IIA)Post Public Exposure VersionPost Public Exposure VersionTable of ContentsForeword ..iFramework1. Definition of internal control ..12. Objectives, Components, and Principles ..53. Effective internal control ..184. Additional Considerations ..225. control Environment ..316. Risk Assessment ..597. control Activities ..878. Information and Communication ..1059. Monitoring Activities ..12310. Limitations of internal control ..135 AppendicesA.

9 Glossary ..140B. Roles and Responsibilities ..144C. Specific Considerations for Smaller Entities ..155D. Methodology for Revising the framework ..159E. Public Comment Letters ..161F. Summary of Changes to the internal control integrated framework Issued in 1992 ..166G. Comparison with COSO Enterprise Risk Management integrated framework ..173 internal control integrated framework September 2012 Draft For Information OnlyPost Public Exposure VersionForewordIn 1992 the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its internal control integrated framework (the original framework ). The original framework has gained broad acceptance and is widely used around the world. It is recognized as a leading framework for designing, implementing, and con-ducting internal control and assessing the effectiveness of internal control .

10 In the twenty years since the inception of the original framework , business and operat-ing environments have changed dramatically, becoming increasingly complex, techno-logically driven, and global. At the same time, stakeholders are more engaged, seeking greater transparency and accountability for the integrity of systems of internal control that support business decisions and governance of the is pleased to present the updated internal control integrated framework ( framework ). COSO believes the framework will enable organizations to effectively and efficiently develop and maintain systems of internal control that can enhance the likelihood of achieving the entity s objectives and adapt to changes in the business and operating environments.