Accountants Unite To Better Measure Business Risks

The accounting profession has united under the aegis of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in an organized effort to develop comprehensive guidance on risks, including the kinds of business risks that toppled Enron.

COSO is comprised of five member organizations: The American Institute of CPAs, the American Accounting Association (AAA), Financial Executives International, the Institute of Internal Auditors and the Institute of Management Accountants. Tony Maki, a partner with Moss Adams LLP in Seattle, Washington, chairs the advisory council for the study on risk analysis.

According to a paper written for the American Accounting Association by advisory council members and academicians Mark Beasley, Doug Prawitt and Larry Rittenberg, the risk study has its roots in a previous COSO research study. The earlier research found a worldwide consensus that all organizations could benefit from improved risk identification and procedures for risk analysis. While many organizations have their own “risk models,” explains the paper, there is no one comprehensive model that pulls together all the risk elements into one encompassing framework for use across a wide variety of organizations.

The goals of the risk project are to develop:

• Actionable guidance to measure and control risk conditions, including assessment tools useful for benchmarking.
• A risk model that is coordinated with but broader than the internal control framework developed by COSO and provides a useful framework for identifying, managing, monitoring and controlling risks.
• Enterprise-wide risk management guidance than emphasizes coordination of risk management across critical segments of a business, not just financial reporting risks, and is targeted for middle market and larger companies while still being useful to other organizations, including government agencies, industry associations and not-for-profit groups.

The COSO project team is being led by PricewaterhouseCoopers. An exposure draft is expected in Fall 2002 in hopes of issuing a final report by Summer 2003. Read the press release about this new project, or view the paper prepared for AAA.

-Rosemary Schlank

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GREVILLE LIBURD , 12 February 2002 @ 17:04 PM  Auditing is a complex and risky task, but the implimentation of current professional rules and guidelines can control the risks involved. Auditing is complex and risky. SAS 39 recognizes this and deals with it. Crucial to current reporting problems is professional independence, not audit risk. SAS 25 as well as SQCS-(1-5) place a good handle on auditor independence, integrity and objectivity. ET 101 and 102 of the AICPA relate these principles to GAAS. Implimentation and sustained monitoring will ensure efficacy. If accountants will not do it, then SEC has legal and moral obligation to do it. SEC should replace audited public companies as the client of accounting firms. However, the auditee should continue to pay auditing fees. Greville G. Liburd, CPA, MBA, 169 Perry Road, Hamden, CT 06514