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CFO: New Guidelines Could Help Deter Fraud

May 28, 2013, 07:27 AM
Filed Under: Fraud
Related: CFO Magazine, Fraud

According to a article, CFOs and their staffs could gain some mental clarity about how to apply internal controls more effectively in the form of a guidance document released last week, its framers think.

Their intent is to provide more practical details than the framework it replaces. The Internal Control-Integrated Framework  culminates a two-and-a-half-year-long project aimed at revamping guidelines dating back to 1992 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO a joint initiative of the American Accounting Association, American Institute of CPAs, Financial Executives International, the Institute of Management Accountants and the Institute of Internal Auditors. 

The new guidelines spell out 17 principles the authors contend that corporations need to follow for their internal controls to be effective. They include “demonstrates commitment to integrity and ethical values; exercises oversight responsibility; establishes structure; authority and responsibility; specifies suitable objectives; and identifies and analyzes risk.” While the principles were implied in the earlier guidance, they weren't specifically cited until the release of last week’s framework.

As David Landsittel, chairman of COSO, explains, the new framework’s 17 principles put "meat on the bones” of five parameters that make up the core principles of internal controls—the control environment, risk assessment, control activities, information and communication, and monitoring activities. “For a framework to be effective, all five components need to be present and functioning and operating together,” he says. 

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