...of COSO Frameworks and Guidance Yongheng Wang Kellstadt Graduate School of Business, DePaul University Abstract Fraudulent financial reporting has always been a crucial issue in business operation. Sometimes companies could report fraudulent financial statements to conceal true information and benefit from questionable transactions. Investors and shareholders would not be able to obtain useful information to make business decisions if financial information failed to reflect business operation and the company’s financial status. Broadly, the market would hurt due to the negative impact on the market efficiency. As a result, COSO, the Committee of Sponsoring Organizations of the Treadway Commission, was formed in 1985. It has published several comprehensive frameworks to help organizations to improve business operation and governance and to avoid fraud. The aim of this report was to study the development of COSO, including its history and main frameworks and guidance regarding internal control, enterprise risk management and fraud deterrence. The report interpreted the three areas under COSO framework with their key compositions and most recent updates. After the detailed interpretation, conclusion and recommendations were given. Keywords: Fraudulent Financial Reporting, COSO, Internal Control, ERM, Fraud Introduction and Background Financial information is a significant and unique composition of the world of business. Analysis on financial information...
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...designed to better measure sustainability measures to expand the welfare state and products, investment, including non-market values, and in particular, the environment-related goods and services. In addition, the green accounting is aimed at the cost and benefit of the protection of the environment and resource depletion of natural capital. It is one of two measurement values are usually not included in the national accounting system, such as the gross domestic product (GDP). Although different in view of how the green accounting, and the technology is used worldwide. Green accounting has many purposes. First, the aim is to use an isolated and elaborate on each of the environmental flow and also to the traditional securities account. By doing so, it can provide an estimate of the total expenditures for the protection of the environment, and the gross domestic product can counter with defensive expenditures. The second purpose is the connection between the physical resource accounts and the financial environment. This will cover equity and natural resources, including those of the economic system. The green accounting to increase capital concept, the system environment, economic (SEEA). This will help to improve maintenance of natural capital and human capital. Green accounting is typically use the traditional financial...
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...other non-financial information by shareholders and users of financial statements. In early 2000’s the stakeholders and shareholders are only concerned with the financial performance but now the trend has changed as that the shareholders and stakeholders who believed that the organization should be responsible to the environment and society in which they operate the business, and therefore it needs to be good for the community. This has caused that many laws and regulations such as environmental and social laws, employment laws, anti-corruption laws and good governance laws developed by the states to protect the environment and social issues icons. The concept of social responsibility has been raised in the context of this because the organization must be committed to run the business ethically and contribute for the growth of the economy, and at the same time improving the standard of life of employees and their families as well as for the society they operate their business and future generation. REQUIREMNT OF THE CURRENT CONCEPTUAL FRAMEWORK Conceptual framework is a guideline issued by international accounting standard board (IASB) for the development of international accounting standards (IAS). It is a practical tool that assist IASB to develop standards and assist preparers to develop consistent accounting policies when there is no standards and assist others stakeholders to understand and interpret the standards. It states that the objective of financial reporting...
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...ACCOUNTING THEORY AND PRACTICE (FAR 600) Teaching and Learning Arrangements (SEMESTER: JAN 2007 – APRIL 2007) COURSE CODE : FAR 600 PROGRAM : BACHELOR OF ACCOUNTING (HONS) CREDIT HOURS : 4 CONTACT HOURS : 4 STATUS : CORE SYNOPSIS This financial accounting course exposes students to accounting theory, corporate accounting policies and financial reporting practices. The importance of history is introduced through a brief discussion on accounting history from both experiences of both western and Muslim Civilization. In understanding the theoretical framework of accounting, the various perspectives on financial accounting theory are examined with particular emphasis on their rationale and implications on accounting practice. General concepts of theory formulation are discussed and types of accounting perspectives and research are also introduced in this course. Corporate Accounting Policies are explained by the development of the Conceptual Framework and the Importance of a Regulatory Environment. The Standard Setting process in Malaysia is discussed. An analytical approach of the accounting standards is adopted by examining the recognition, measurement, disclosure and presentation of accounting information is discussed. Significant emphasis is placed on Asset Measurement, Nature of Liabilities, Types of Equity, Recognition of Revenue and Income Finally contemporary accounting practices and...
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...ANAGEMENT GUIDE Management’s Responsibility for Internal Controls Thomas P. DiNapoli State Comptroller For additional copies of this report contact: Division of Local Government and School Accountability 110 State Street, 12th floor Albany, New York 12236 Tel: (518) 474- 4037 Fax: (518) 486- 6479 or email us: localgov@osc.state.ny.us www.osc.state.ny.us October 2010 Table of Contents Who’s Responsible.............................................................................................................. 2 The Origin - Committee of Sponsoring Organizations ......................................................... 4 Integrated Internal Control Framework - The Big Picture ..................................................... 5 The Five Essential Elements of the Internal Control Framework ........................................... 6 Limitations of Internal Controls ..........................................................................................15 The Impact of Information Technology ...............................................................................16 The Role of Internal Auditors and Audit Committees ..........................................................17 Conclusion ....................................................................................................................... 20 Additional Resources .........................................................................................................21 Central Office...
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...PRINCIPLES GOVERNING AN AUDIT OF FINANCIAL STATEMENTS (Effective for audits of financial statements for periods beginning on or after June 15, 2006)∗ CONTENTS Paragraph Introduction .................................................................................................... 1 Objective of an Audit of Financial Statements .............................................. 2-3 Ethical Requirements Relating to an Audit of Financial Statements ............. 4-5 Conduct of an Audit of Financial Statements ................................................ 6-9 Scope of an Audit of Financial Statements .................................................... 10-14 Professional Skepticism ................................................................................. 15-16 Reasonable Assurance ................................................................................... 17-21 Audit Risk and Materiality ............................................................................. 22-32 Responsibility for the Financial Statements ................................................... 33-36 Determining the Acceptability of the Financial Reporting Framework ......... 37-48 Expressing an Opinion on the Financial Statements ...................................... 49-51 Effective Date ................................................................................................ 52 ∗ ISA 315, “Understanding the Entity and Its Environment and Assessing the Risks of Material...
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...Helen Valentine ACCT 3222 Sec. 01 October 18, 2011 The COSO Framework Due to questionable corporate political campaign finance practices and foreign corrupt practices in the mid -1970s, the U.S. Securities and Exchange Commission (SEC) and the U.S. Congress enacted campaign finance law reforms and the 1977 Foreign Corrupt Practices Act (FCPA) which criminalized transnational bribery and required companies to implement internal control programs. In response, the Treadway Commission, a private-sector initiative, was formed in 1985 to inspect, analyze, and make recommendations on fraudulent corporate financial reporting. The Treadway Commission studied the financial information reporting system over the period from October 1985 to September 1987 and issued a report of findings and recommendations in October 1987, Report of the National Commission on Fraudulent Financial Reporting. As a result of this initial report, the Committee of Sponsoring Organizations (COSO) was formed and it retained Coopers & Lybrand, a major CPA firm, to study the issues and author a report regarding an integrated framework of internal control. In September 1992, the four volume report entitled Internal Control— Integrated Framework was released by COSO and later re-published with minor amendments in 1994. This report presented a common definition of internal control and provided a framework against which internal control systems may be assessed and improved. This report is one standard that...
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...behaviour and to determine the future financial performance of companies. ESG factors are a subset of non financial performance indicators that includes sustainable, ethical and corporate governance issues such as managing the company’s carbon footprint and ensuring there are systems in place to ensure accountability. The European Federation of Financial Analysts Societies (EFFAS) has defined topical areas for the reporting of ESG issues, and developed Key Performance Indicators (KPIs) for use in financial analysis of corporate performance. EFFAS has identified nine topical areas that apply to all sectors and industries: 1) Energy efficiency; 2) Greenhouse gas (GHG) emissions; 3) Staff turnover; 4) Training & qualification; 5) Maturity of workforce; 6) Absenteeism rate; 7) Litigation risks; 8) Corruption; 9) Revenues from new products. the ESG Framework approach now provides investors with a comprehensive profile of the long-term sustainability for a publicly-owned corporation that may be in portfolio or is being considered for the portfolio. IMPORTANCE TO INVESTORS ESG has become part of investment to describe the performance of investment and fund portfolios on ESG criteria and the quality of their performance against measurable ESG factors that are reported to shareholders. Investors have considered the ESG considerations to be non-financial and intangibles – but for a growing number of investors, ESG Frameworks are very tangible with reflections of the...
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...Acknowledgements 3. Introduction (include reason for paper and choice of company) MODULE TWO – External Environment Analysis 1. Definition of Industry (include overview) 2. Analysis of Present Task Environment 3. Analysis of Potential Changes in the Macroenvironment 4. Threats and Opportunities Basis: 1. Effect of potential changes on the macroenvironment on the barriers and determinants of the task environment. 2. The effect on the forces of the task environment. 3. The conclusion on whether the potential change on the macro is a threat or opportunity. Note: The potential changes in the macroenvironment that will cause a change in the in the task environment will be a threat or an opportunity to the industry. 5. Industry and competitive analysis. 6.1 Strategic map 6.2 Market Definition 6.3 Market Size 6. Broader Societal Expectations 6.1 Corporate Social Responsibility MODULE THREE – Analysis of Internal Environment 1. Overview of the company 2. Financial Analysis 2.1 Financial Ratios 3. Value Chain Analysis 4. Strengths and Weaknesses 4.1 Describe the Strengths and weaknesses 4.2 State the basis for each strength and weakness. Basis is from Financial and Value Chain Analysis 5. Personal values MODULE FOUR – Strategic Plan 1. Vision (include mission) 2. Objectives – Financial, Social and Strategic Basis: Vision Note: Objectives must be SMART 3. Evaluation of Present...
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...Andersen, WorldCom. What does these companies and others have in common? They involved audit and corporate governance failures, resulting in the erosion of public confidence. Because of these high-profile corporate and accounting scandals, Congress passed the Public Company Accounting Reform and Investor Protection Act, commonly known as the Sarbanes Oxley Act of 2002 (SOX). SOX mandated reforms to improve financial disclosures from corporations and to prevent accounting fraud. I. SOX SOX applies to all public companies in the United States and international companies that have registered equity or debt securities under the Securities Exchange Act of 1934. It is also applicable to accounting firms that provide auditing services to these companies subject to the Act. Its purpose is to enhance corporate accountability and responsibility. The Eleven Titles There are eleven titles in SOX. Title I addresses public company accounting oversight board. Title II addresses an auditor’s independence. Title III addresses corporate responsibility. Title IV address enhanced financial disclosures. Title V addresses analyst conflicts of interest. Title VI addresses commission resources and authority. Title VII addresses studies and reports regarding consolidation, credit rating, violations, enforcement and investment banks. Title VIII addresses corporate and criminal fraud accountability. Title IX addresses white-collar crime penalty. Title X addresses corporate tax returns...
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...Assurance. auditing and assurance FOR PUBLIC ACCOUNTANTS PERFORMING AUDIT AND REVIEW ENGAGEMENTS BULLETIN Staff contact Chi Ho Ng, CA, CPA(IL), MBA Principal Auditing and Assurance Standards Department 277 Wellington Street West Toronto, ON M5V 3H2 Tel: (416) 204-3443 E-mail: chiho.ng@cica.ca Fax : (416) 204-3408 Auditing Considerations in an Uncertain Economic Environment Uncertainties in the current economic environment There is a possibility that the Canadian economy may weaken in the near term. This has been noted in various sources, including the economic forecast for Canada issued by the Organization for Economic Co-operation and Development. Heightened risks from renewed financial-market turmoil linked to the European sovereign debt crisis and high levels of household indebtedness are eroding consumer confidence. In January 2009, staff of the Auditing and Assurance Standards Board (AASB) issued a Risk Alert, “Auditing Considerations in the Current Economic Environment,” to highlight matters for auditors to consider when responding to higher risks of material misstatements of financial statements of entities significantly affected by the 2007/2008 downturn in the Canadian economy. This Bulletin updates the January 2009 Risk Alert to make reference to the Canadian Auditing Standards...
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...risk management, fraud, and financial reporting. COSO has established a common internal control model against which companies and organizations may assess their control systems. The COSO framework defines internal control as a process, effected by an entity's board of directors, management and other personnel, designed to provide "reasonable assurance" regarding the achievement of objectives in the following categories: * Effectiveness and efficiency of operations * Reliability of financial reporting * Compliance with applicable laws and regulations. * Safeguarding of Assets (MHA) The COSO framework involves several key concepts: * Internal control is a process. * Internal control is affected by people. * Internal control can be expected to provide only reasonable assurance, not absolute assurance, to an entity's management and board. * Internal control is geared to the achievement of objectives in one or more separate but overlapping categories. COSO internal control framework consists of five interrelated components derived from the way management runs a business. These components provide an effective framework for describing and analyzing the internal control system implemented in an organization as required by financial regulations (Securities Exchange Act of 1934). The five components are control environment, risk assessment, control objectives, information and communication, and monitoring. Five framework components The COSO internal...
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...company goals by following policies. * Administrative Controls - help ensure operational efficiency and adherence to managerial policies. * Accounting controls - safeguard assets and ensure the reliability of accounting records. * Internal control structure - policies and procedures established to provide reasonable assurance that the organization's specific objectives will be achieved. 1. Control environment 2. Accounting system 3. Control procedures * Internal control classifications 1. Preventive, detective, corrective 2. Feedback, feedforward 3. General, application 4. Input, processing and output COSO - Committee of Sponsoring Organizations * Internal control - process implemented by management, the BOD, and those under their direction to provide reasonable assurance that control objectives are achieved with regard to: 1. Effectiveness and efficiency of operations 2. Reliability of financial reporting 3. Compliance with applicable laws and regulations * Control environment 1. Mgt philosophy and operating style 2. Organizational structure 3. Audit committee of the board of directors 4. Methods of assigning authority and responsibility 5. Human resources...
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...application and promotion in China's enterprises, but also hindered their own theory the depth development and research efficiency. This paper describes the standardization of management accounting principles, this paper discusses the basic theory that the standardization of management accounting, Analysis of building management accounting theoretical framework the various elements and the logical relationship between them, and select the appropriate logical starting point as a starting point to build the foundation of management accounting theoretical framework. Keywords: management accounting, standardization, basic principles, basic theoretical system, theoretical framework. 1 Introduction Management accounting as one of the two branches of modern accounting, after decades of development, both in theory and practice have made some development, its important role of business management has gradually been of concern to the community, and follow-up is considered the accounting industry development. But in general, Management accounting in China there are still many problems, as opposed to the development of more sophisticated financial accounting, management accounting has not formed a complete system of theory and method, in theory, structure, methodology, content, system, and so are not standardized. Management accounting irregularities, not only affect their application in practice and promotion, but also affect people more in-depth study of the discipline. This article focuses...
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...and Financial Professionals in Business (IMA), and Financial Executives International (FEI). Each sponsoring organization appoints representatives to periodically work together on specific projects. The goal of COSO is to provide leadership through the development of frameworks and guidance on enterprise risk management, internal control and fraud deterrence to enhance organizational governance and decrease fraud 1. The History of COSO and the Creation of the COSO Framework Due to the public criticisms against both accounting professionals and the U.S. Securities and Exchange Commission (SEC), the Treadway Commission was formed in 1985 to inspect fraudulent financial statements, especially in the aspects of reliability and accuracy. In 1987, the Treadway Commission issued its first report on fraudulent financial reporting. COSO was created because of this report. In 1992, COSO released the report titled Internal Control-Integrated Framework, which defined the concept of internal control and established a framework on how to make internal control systems work effectively. The 1992 COSO framework contains the following five integrated components of internal control1: Control environment; Risk assessment; Control activities; Information and communication; and Monitoring. The framework was revised in 2013 and the five components mentioned above remain fundamental to the updated framework. As the Sarbanes-Oxley Act of 2002 (SOX) was released, COSO framework became...
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