New guidance aims to help organizations better monitor the effectiveness of their internal control systems.
The Committee of Sponsoring Organizations of the Treadway Commission and Grant Thornton have collaborated on “Guidance on Monitoring Internal Control Systems,” to help companies comply better with Sarbanes-Oxley requirements for auditing internal controls.
The guidance focuses on helping companies improve their monitoring of internal control. It is also aimed at helping companies use monitoring to make the internal control process more efficient as well as effective, and to consider the balance of efficiency and effectiveness holistically, including the level of work performed by management and internal audit, and the degree to which the external auditors can rely on that work, based on factors such as the persuasiveness of information gathered in the monitoring process.
The guidance recognizes that although many organizations currently have effective monitoring, they often do not take full advantage of the information provided. In other cases the opposite is true and the routine monitoring is not as effective as it could be, resulting in additional testing at or near yearend. In both cases an improved approach to effective monitoring implementation can enhance the efficiency and effectiveness of internal control – in many cases at lower overall costs to the organization.
The introduction can be downloaded for free from COSO’s Web site at www.coso.org. The guidance is available both in electronic and hard-copy format and can be purchased at http://www.cpa2biz.com/search/results.jsp.
COSO engaged Grant Thornton in January 2007 to lead the development of the project after concluding there was a need for more guidance on effectively monitoring internal controls, as well as complying with Sarbanes-Oxley. In addition to the project team — including Grant Thornton partners and led by Grant Thornton national managing partner of corporate governance Trent Gazzaway — an oversight task force consisted of representatives from COSO's five sponsoring organizations (the American Institute of CPAs, the American Accounting Association, Financial Executives International, the Institute of Internal Auditors, and the Institute of Management Accountants) and other experts. There was also participation by the U.S. Government Accountability Office; and representatives from audit firms and both large and small companies; as well as project observers from the Securities and Exchange Commission and the Public Company Accounting Oversight Board. Because of the importance of the project, the guidance was twice exposed for public comment before final publication.
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