Accounting

COSO 2013: What to Think About Now


FEI Daily | 06/13/2014
by Leena Roselli

CFOs should start putting a cross functional team together now to transition to the new global internal control framework or risk quickly falling behind and triggering the interest of regulators, according to a new report issued by Financial Executives Research Foundation (FERF) and RR Donnelley.

The updated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (COSO 2013) includes a number of enhancements that update the document from when it was published more than two decades ago.

According to the FERF and RR Donnelley report, financial preparers need to act now  to adopt COSO 2013 successfully. The report states that while most companies are still in the initial stages of transitioning to the new framework, CFOs should start creating teams that will make the transition a priority and that an initial “gap assessment” should be the first order of business.

The report – which includes input from a COSO Board member, auditors and management participants – adds that if a company has not adopted the framework by December 15, 2014, it may receive a comment letter or questions from the U.S. Securities and Exchange Commission about why it has not adopted the new framework  yet.

Other key takeaways from the report include:

  1.  All interviewees agree that there is minimal impact if strong controls are in place prior to transition; however, the most common gaps is documenting existing processes.
  2. Auditors share that there is not one particular area that companies should focus their efforts but should consider all five components.
  3. Companies should also consider controls related to: a) Information technology and b) Outside Service Providers (OSPs) which are a new focus in the 2013 Framework.
  4. Depending on what function the Data Management System (DMS) has in relation to the financial reporting will determine whether the auditor will consider it in their review of internal controls.
  5. XBRL is a form of reporting that companies should provide reasonable assurance as to its accuracy and correctness.
For more information on the 2013 COSO Framework, including examples and these detailed interviews, by visiting our webpage at www.ferf.org and selecting “research publication”, or by clicking download report. In addition, look out for an upcoming webcast on COSO 2013.