The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a globally recognized model for evaluating and improving internal control systems, risk management and governance processes within an organization. Companies face various risks that can be categorized under COSO's five components: control environment, risk assessment, control activities, information and communication, and monitoring activities. These risks range from financial inaccuracies due to inadequate internal controls, to failures in compliance with laws and regulations, operational inefficiencies, and reputational damage due to poor governance practices. Understanding and addressing these risks is crucial for maintaining the integrity and efficiency of business operations.

To effectively manage these risks, companies must first establish a strong control environment. This involves setting a tone at the top that promotes ethical behavior and a culture of accountability throughout the organization. Senior management should lead by example, demonstrating a commitment to integrity and ethical values. Effective communication channels must also be established to ensure that all levels of the organization are informed and that information flows both upward and downward. This foundational step helps create a conducive atmosphere for implementing more specific risk management strategies.

Furthermore, companies should conduct thorough risk assessments to identify and analyze potential risks that could impact their objectives. This process involves not only identifying new risks as they emerge but also reevaluating existing risks as external and internal environments change. Following risk identification, control activities such as policies, procedures and checks must be designed and implemented to mitigate identified risks. Continuous monitoring and regular reviews of the effectiveness of the control systems are essential to adapt to changes and improve the risk management processes. Through such structured approaches, companies can safeguard their assets, ensure the accuracy and reliability of their financial reporting, and operate more efficiently while complying with applicable laws and regulations.

1. COSO: Step Up Your ERM, Integrated and Internal Controls

What is COSO? COSO is a framework used by businesses to establish a set of internal controls for integration into their business processes. This set of controls assures that an organization is operating in accordance with established industry standards and COSO best practices and functions in an ethical and transparent manner. Here's a look at the COSO risk assessment model and the five components of COSO.

2. COSO ERM Framework: Key Facts You Need to Know

When initiating the project to update its enterprise risk management (ERM) framework, COSO saw opportunities to achieve clarity on several fronts. The framework is principles-based, meaning it introduces five interrelated components and outlines 20 relevant principles arrayed among those components. Learn more about the updated COSO Enterprise Risk Management (ERM) framework, designed to align risk, strategy and performance seamlessly.

3. Five Components of the COSO Framework You Need to Know

In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) developed a COSO Framework for evaluating internal controls. This model has been adopted as the generally accepted framework for internal control and is widely recognized as the definitive standard against which organizations measure the effectiveness of their systems of internal control. Learn how the five COSO framework internal control components can help your organization achieve its mission, strategies and business objectives.

4. How COSO Frameworks Improve Organizational Performance and Governance

Since their inception, COSO’s Enterprise Risk Management — Integrated Framework and Internal Control — Integrated Framework (the COSO frameworks) were intended to provide guidance for management on how to implement and evaluate effective enterprise risk management (ERM) and internal control processes. When applied effectively, the framework's concepts contribute to the end result of improving organizational performance and governance in significant ways. This booklet illustrates how the enterprise risk management (ERM) framework and the new internal control framework can enhance organizational performance, governance, strategy setting and management processes.

5. COSO 2013: Why Should You Care?

The COSO Framework emphasizes the importance of the tone at the top and the board of director’s responsibility for overseeing the development and performance of internal control. This issue of Board Perspectives: Risk Oversight explores six reasons why the board, or one or more of its committees, should care about the updated Framework and offer pertinent questions for boards to consider.

6. Updated COSO ERM Framework: What's New?

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its Enterprise Risk Management – Aligning Risk with Strategy and Performance on June 14 for public exposure and comment during a period to expire September 30, 2016. This issue of The Bulletin discusses why the COSO ERM Framework needed to be updated and how the focus is now on what is really important in making enterprise risk management work within an organization.

7. The Updated COSO Internal Control Framework

In May of 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its long-awaited updated Internal Control – Integrated Framework (New Framework). The framework facilitates efforts by organizations to develop cost-effective systems of internal control and supports organizations as they adapt to the increasing complexity of a changing business environment. In this booklet, we address various questions regarding the New Framework from COSO, including the reasons why it was updated, what has changed, the process for transitioning to its use, and steps companies should take now.

8. COSO 2013: What Have We Learned?

COSO implementation has been an important endeavor for many companies listed on exchanges in the United States in their efforts to comply with Section 404 of the Sarbanes-Oxley Act of 202 (SOX). Section 404 compliance is important, as it relates to maintaining effective ICFR. This issue of Board Perspectives: Risk Oversight outlines important lessons for board members to consider as directors evaluate internal control to their risk oversight endeavors.

9. Updated COSO Internal Control Framework: Frequently Asked Questions

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has released its updated Internal Control – Integrated Framework. The original version, released in 1992, has gained broad acceptance and continues to be recognized as a leading resource to provide guidance on the design and evaluation of internal control. The new framework issued by COSO is an important development, as it enables organizations to develop systems of internal control effectively and efficiently. It In this issue, we address various questions regarding the new framework.

10. COSO Internal Controls Guide: Integrated Framework

COSO has issued Illustrative Tools for Assessing Effectiveness of a System of Internal Control and the Internal Control over External Financial Reporting (ICEFR): A Compendium of Approaches and Examples. The Illustrative Tools are expected to assist users when assessing whether a system of internal control meets the requirements set forth in the updated Framework. The ICEFR Compendium is particularly relevant to those who prepare financial statements for external purposes based upon requirements set forth in the updated Framework. This executive summary provides an overview of the updated Framework.

Browse our COSO topic page to see all of the COSO tools and publications we have published.