Committee of Sponsoring Organizations (COSO)

Definition

The Committee of Sponsoring Organizations (COSO) is a joint initiative to combat corporate fraud by providing frameworks and guidance on enterprise risk management, internal control, and fraud deterrence. It is best known for its Internal Control-Integrated Framework, widely used for designing and evaluating internal controls.

5 Must Know Facts For Your Next Test

1. COSO was established in 1985 by five private sector organizations including the AICPA and IMA.
2. The COSO Internal Control-Integrated Framework is one of the most widely used models for assessing internal controls.
3. COSO identifies five key components of internal control: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities.
4. The framework helps organizations achieve objectives related to operations, reporting, and compliance.
5. COSO's principles-based approach allows organizations flexibility in designing systems tailored to their specific needs.

Review Questions

• What are the five key components of internal control identified by COSO?
• Why was COSO originally established?
• How does the COSO framework assist organizations in achieving their objectives?

Related terms

Internal Controls: Mechanisms or procedures implemented to ensure integrity of financial data, operational effectiveness, and compliance with laws.

Fraud Deterrence: Strategies and practices aimed at preventing fraudulent activities within an organization.

Risk Assessment: The process of identifying and analyzing potential risks that could negatively impact organizational objectives.