Ease the transition to the new COSO framework with practical
strategy

Internal Control Audit and Compliance provides complete
guidance toward the latest framework established by the Committee
of Sponsoring Organizations (COSO). With clear explanations and
expert advice on implementation, this helpful guide shows auditors
and accounting managers how to document and test internal controls
over financial reporting with detailed sections covering each
element of the framework. Each section highlights the latest
changes and new points of emphasis, with explicit definitions of
internal controls and how they should be assessed and tested.
Coverage includes easing the transition from older guidelines, with
step-by-step instructions for implementing the new changes. The new
framework identifies seventeen new principles, each of which are
explained in detail to help readers understand the new and emerging
best practices for efficiency and effectiveness.

The revised COSO framework includes financial and non-financial
reporting, as well as both internal and external reporting
objectives. It is essential for auditors and controllers to
understand the new framework and how to document and test under the
new guidance. This book clarifies complex codification and provides
an effective strategy for a more rapid transition.

* Understand the new COSO internal controls framework

* Document and test internal controls to strengthen business
processes

* Learn how requirements differ for public and non-public
companies

* Incorporate improved risk management into the new
framework

The new framework is COSO's first complete revision since the
release of the initial framework in 1992. Companies have become
accustomed to the old guidelines, and the necessary procedures have
become routine - making the transition to align with the new
framework akin to steering an ocean liner. Internal Control
Audit and Compliance helps ease that transition, with clear
explanation and practical implementation guidance.

LYNFORD GRAHAM, CPA, has more than 30 years of public accounting experience in audit practice and in various national firm policy development groups. He is a visiting professor of accountancy and executive-in-residence at Bentley University, Waltham, MA. He currently maintains an active consultancy practice in statistical audit sampling, litigation support, and audit methodologies, and develops numerous training seminars for conferences and firms.

Zusammenfassung
Ease the transition to the new COSO framework with practical strategy

Internal Control Audit and Compliance provides complete guidance toward the latest framework established by the Committee of Sponsoring Organizations (COSO). With clear explanations and expert advice on implementation, this helpful guide shows auditors and accounting managers how to document and test internal controls over financial reporting with detailed sections covering each element of the framework. Each section highlights the latest changes and new points of emphasis, with explicit definitions of internal controls and how they should be assessed and tested. Coverage includes easing the transition from older guidelines, with step-by-step instructions for implementing the new changes. The new framework identifies seventeen new principles, each of which are explained in detail to help readers understand the new and emerging best practices for efficiency and effectiveness.

The revised COSO framework includes financial and non-financial reporting, as well as both internal and external reporting objectives. It is essential for auditors and controllers to understand the new framework and how to document and test under the new guidance. This book clarifies complex codification and provides an effective strategy for a more rapid transition.

• Understand the new COSO internal controls framework
• Document and test internal controls to strengthen business processes
• Learn how requirements differ for public and non-public companies
• Incorporate improved risk management into the new framework

The new framework is COSO's first complete revision since the release of the initial framework in 1992. Companies have become accustomed to the old guidelines, and the necessary procedures have become routine making the transition to align with the new framework akin to steering an ocean liner. Internal Control Audit and Compliance helps ease that transition, with clear explanation and practical implementation guidance.

Preface xi

Acknowledgments xv

Chapter 1: What We All Share 1

Need for Control Criteria 1

Overview of the COSO Internal Control Integrated Framework 2

Holistic, Integrated View 3

Revised COSO Internal Controls Framework 6

What We Must Do 8

Basic Scoping and Strategies for Maintenance 11

Where We Depart 12

Triangle of Efficiency 13

Controls versus Processes 14

The Debate Continues 18

Organization of This Book 18

Appendix 1A: COSO 17 Principles 20

Chapter 2: Setting the Scope of Your Documentation Project: Identifying the Core 21

Start with Business Objectives 21

After the Initial Year 24

Mapping the Entity to the Financial Statements: Ins and Outs 25

Consider Risks, Not Just Quantitative Measures 27

Inherent and Control Risk 28

Overstatement and Understatement 28

Does In Scope Imply Extensive Testing? 37

A Consolation 39

Be Careful Out There! 40

Appendix 2A: Summary of Scoping Inquiries 42

Chapter 3: The Risk Assessment Component 45

Risk Assessment Principles in COSO 46

Cost Control 46

Basics 47

Likelihood, Magnitude, Velocity, and Persistence 48

Separate Assessments of Inherent and Control Risks 50

Role of Assertions 51

Assertions 52

Principles 6 and 7: Specify Suitable Objectives; Identify and Analyze Risk 56

Identifying Risks 59

External Sources of Risk Information 60

Internal and External Reporting Risks 61

Compliance Risks 61

Disclosed Material Weaknesses in Risk Assessment 62

Principle 8: Assess Fraud Risk 62

Auditor Responsibility to Detect Fraud 65

Antifraud Controls for Management to Consider 66

Ties to Other Principles and Components 66

Principle 9: Identify and Assess Significant Change 66

Gathering Information to Support the Risk Assessment and Consider Change 68

Appendix 3A: SAS No. 99 Exhibit: Management Antifraud Programs and Controls 72

Attachment 1: AICPA CPA's Handbook of Fraud and Commercial Crime Prevention Code of Conduct 87

Attachment 2: Financial Executives International Code of Ethics Statement 91

Appendix 3B: Understanding Fraud Risk Assessment 93

Chapter 4: Control Environment 99

Principle 1: Commitment to Integrity and Ethical Values 100

Principle 2: Board of Directors (Governance) Demonstrates Independence from Management and Exercises Oversight of the Development and Performance of Internal Control 104

Principle 3: Management Establishes, with Board Oversight, Structures, Reporting Lines, and Appropriate Authorities and Responsibilities in the Pursuit of Objectives 109

Principle 4: Commitment to Attract, Develop, and Retain Competent Individuals in Alignment with Objectives 110

Principle 5: The Organization Holds Individuals Accountable for Their Internal Control Responsibilities in the Pursuit of Objectives 113

Appendix 4A: Understanding and Awareness of Control Responsibilities 117

Chapter 5: C…