COSO Guidance on Monitoring Internal Control Systems, for Audit Committees


By Dave Tate, CPA, Esq. - COSO Guidance on Monitoring Internal Control Systems, for Audit Committees

For those of you who are familiar with some of my writings, you know that I have some concern about the further expansion of audit committee duties, and also believe that the duties that exist need to be fairly specifically defined so that all of the stakeholders involved have an understanding about the duties that exist, and that do not exist.

The COSO draft document (the comment period is closed, but the final document has not been released), Guidance on Monitoring Internal Control Systems, briefly discusses the role of the board/audit committee. The discussion paper can be found at http://www.coso.org/publications.htm

In pertinent part, the discussion paper states:

“Controls performed below the senior-management level can be monitored by management personnel or their objective designees. However, controls performed directly by senior management, and controls designed to prevent or detect senior-management override of other controls, cannot be monitored objectively by senior management or its direct reports. In these limited circumstances, monitoring should be performed by the board — often through the audit committee — and its resources (e.g., internal audit).

The board is also in the best position to evaluate whether management has implemented effective monitoring procedures elsewhere in the organization. It makes this assessment by gaining an understanding of how senior management has met its responsibilities.

In most organizations, it is neither feasible nor necessary for the board to understand all of the details of every monitoring procedure, but the board should have a reasonable basis for concluding that management has implemented an effective monitoring system. Boards obtain persuasive information in support of their conclusions through inquiry, observation and oversight of management; the internal audit function (if present); hired specialists (when necessary); and external auditors. They might also consider the output from ratings agencies and financial analysts. Finally, in some circumstances, boards might make inquiries of nonmanagement personnel, customers, and/or vendors.”

I do like the fact that the COSO position does not expand the duties of the audit committee (or board) with respect to monitoring controls. I also like the references to reliance on internal audit and other sources of evaluation and input. To a significant extent the audit committee has to rely on other people to help the committee satisfy its due diligence. I might even suggest that in some circumstances the COSO position understates the audit committee’s responsibilities with respect to monitoring internal controls. As in most circumstances, it would be helpful for the COSO discussion to be more detailed and specific, as long as that detail does not overly expand the audit committee’s responsibilities.

Dave Tate, CPA, Esq.
http://davidtate.us
tateatty@yahoo.com

AccountingWEB Bloggers Crew
http://www.accountingweb.com/blogs/
The AccountingWEB news wires are also
free. It’s a one-minute sign-up on the site.

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42373

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74565

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47350

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

86955
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19883

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54465

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

79101

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24501

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

62850

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33876
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
100810
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
25133

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

51310
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
26956
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31265

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

98173

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32456

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

109058

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59542

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38518
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65426

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

91243

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

52325