The proposal lacks real-world examples. CFOs will need to fill in the blanks.
[Kristine Brands, Assistant Professor of Accounting in the College for Professional Studies at Regis University, contributes to CFO.]
CFOs have had to certify their company’s internal controls for nearly a decade, putting their professional and personal well-being on the line every time they sign a 10-K. The work hasn’t gotten any easier as internal-control risks continue to increase.
Forthcoming guidance from COSO (the Committee on Sponsoring Organizations) may help executives who sign off on internal controls keep with the times. However, CFOs will continue to make missteps even if they religiously follow the guidelines, since they lack real-world examples. As we like to say in Colorado, “there’s no silver bullet.” If you follow everything in COSO’s exposure draft released in December, there is no guarantee that your company’s system of internal controls will be effective. This is especially true of the proposal’s guidelines for companies on how to perform risk assessments of their internal controls.
Still, management will likely find the new guidance more up-to-date. CFOs have until the end of March to comment on COSO’s refresh of its 1992 Internal Control – Integrated Framework (IC-IF). A key driver for the refresh project is the dramatic change in the business environment since the original IC-IF was issued. Increased business complexity, globalization of markets, regulatory mandates, and more enterprise risk factors have put greater pressure on companies to develop and implement an effective system of internal controls.
Read the rest of the CFO article by Kristine Brands, including aspects of “How the Framework Will Change” and “How the Framework Will Be Implemented.”
Kristine Brands has extensive work experience in finance, accounting, controllership, auditing, software engineering, and financial systems design and implementation. Holding both CPA and CMA certificates, Kristine is heavily involved in the research and policy areas of performance measurement, International Financial Reporting Standards, and XBRL and interactive data. Speaks at national accounting conferences on accounting issues and serves on the Institute of Management Accountant’s XBRL Standing Committee.