On September 18, 2012, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released the Internal Control over External Financial Reporting: Compendium of Approaches and Examples (the Compendium) for public comment through November 20, 2012. In conjunction with the release of the Compendium, COSO has made available two other documents. This In brief article provides an overview of the Compendium.
On September 18, 2012, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released the Internal Control over External Financial Reporting: Compendium of Approaches and Examples (the Compendium) for public comment through November 20, 2012. In conjunction with the release of the Compendium, COSO has made available two other documents: (1) the revised version of the previously exposed Internal Control — Integrated Framework (the Updated Framework) which incorporates revisions arising from consideration of comments received from more than 200 organizations and professionals, and (2) the proposed Illustrative Tools: Assessing Effectiveness of a System of Internal Control (the Illustrative Tools).
The Compendium is part of COSO’s project to update its Internal Control–Integrated Framework, which was issued in 1992 (the Original Framework). COSO engaged PwC to author the Updated Framework and prepare the Compendium. The Compendium illustrates how the principles set forth in the proposed Updated Framework can be applied in designing, implementing and conducting internal control over external financial reporting. COSO believes it is particularly relevant to those who publicly report on the effectiveness of their system of internal control over financial reporting based upon requirements set forth in the Updated Framework. While the approaches set forth in the Compendium and the Illustrative Tools are likely to be relevant to many entities, COSO recognizes different approaches may be applied depending on the entity's circumstances.
What is the purpose of the compendium?
The Compendium has been developed to assist users when applying the Updated Framework to external financial reporting objectives and is intended to assist users in understanding how the Updated Framework can be applied. The Compendium provides additional reference material relating to the following concepts discussed within the Updated Framework:
The Compendium also reflects many changes in the business, operating, and regulatory environments during the past several decades.
All companies (public and private) as well as not-for-profit and governmental entities that use the Original Framework as the basis for designing and implementing their system of internal control will be affected by this update.
COSO currently plans to release final documents in the first quarter 2013. COSO has not specified an effective date or a transition period for adopting the Updated Framework. COSO expects that the Updated Framework will eventually supersede the Original Framework. Also, the Compendium will eventually supersede the Internal Control over Financial Reporting — Guidance for Smaller Public Companies issued in 2006. COSO plans to continue discussions with regulators and other stakeholders with respect to the transition period for the Updated Framework.
The 60-day public comment period ends on November 20, 2012. COSO encourages comments on the Compendium as well as the Updated Framework and Illustrative Tools.
The entire public exposure package, presentation materials, and COSO's responses to frequently asked questions are available on the COSO website at www.coso.org. We plan to issue a Dataline containing additional analysis and insight before the end of the 60-day comment period.
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact Stephen Soske in the Boston office (1-617-530-5731), Cara Beston in the San Jose office (1-617-519-5572), or Chuck Harris in National Auditing Services (1-973-236-5340).
Charles E. Harris
Partner, National Auditing Services
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