Exploring the Treadway Commission\'s Purpose There are a variety of organization

Question

Exploring the Treadway Commission's Purpose

There are a variety of organizations that provide guidance on aspects of organizational risks and internal controls. Go to the website for the Treadway Commission (http://www.coso.org/) and familiarize yourself with the content contained therein. Based on your knowledge of the Commission's purpose, write a 2- to 3-page paper that relates the creation and development of the Commission to the history of risk management.

Your paper should reflect the application of the resources presented this week as well as knowledge gained from optional readings.

Be sure to support your work with specific citations from this week's Learning Resources and any additional resources.

RESOURCES:

Chapters 1, 2,& 6 from the following book:

http://wafaa-sherif.com/new/ar/wp-content/uploads/2012/11/Enterprise%20Risk%20Management.pdf

-AND-

http://ccrm.berkeley.edu/pdfs_papers/DHSGWorkingPapersFeb16-2011/DHM2-TheValue-of-the-RiskAssessmentProcess-DMP_DHSG-Jan2011.pdf

Explanation / Answer

Enterprise Risk Management

Introduction :- In today’s scenario, more and more companies are coming into operations. The operations are now becoming more complex. Moreover, they are not bounded by boundaries. Additionally, technology kept on changing day by day.

Based on above complexities sited above, there is always an risk associated with the Business. These risks can not be avoided but can be minimize by using various tools/systems/softwares.

Such management of Risk is called as Enterprise Risk Management.

COSO formation and Objectives

In order to mitigate the risks associated with the business houses, a committee is formed with 5 named Institute of Accountants/Auditors. This committee works to provide thought leadership through the development of comprehensive frameworks and guidance on enterprise risk management, internal control and fraud deterrence designed to improve organizational performance and governance and to reduce the extent of fraud in organizations.

COSO was organized in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, an independent private-sector initiative that studied the causal factors that can lead to fraudulent financial reporting. It also developed recommendations for public companies and their independent auditors, for the SEC and other regulators, and for educational institutions.

The National Commission was sponsored jointly by five major professional associations headquartered in the United States:

Working and development of COSO over 30 years

Each sponsoring organization shall appoint an individual to be its representative to COSO. Each sponsoring organization will determine its own criteria and characteristics for appointing a member (e.g., length of time, staff or volunteer, etc.). Committee members are responsible for COSO’s strategy, funding and development of frameworks, guidance and research. Committee members are expected to be empowered, participative and highly supportive of COSO’s mission

From the last 30 years, Business has changed drastically. Now the whole globe becomes like a small place to work upon. Over the time, several different risks were associated with the business. Committee members kept on arranging meetings, research on different areas, present papers on ERP and provide with guidelines to manage the Risks associated with reporting. Thus inspiring leadership in the areas of risks management over the USA.

Earlier, when this committee was gathered, then business risks was not at much level. At that point, accounting standards with regular audit was enough. Now as business are progressing, risks associated with business and its reporting enlarged. To come up with the same, IFRS came into being. These standards are now implementing all over the Globe for standardization and uniquiness.

Even, Internal Auditors as well as Statutory Auditors are given more responsibility to use different techniques like CADD ,CAMM for forensic audit. System Auditors are also burdened with higher responsibility to thoroughly audit the system of organization, so that true and fair reporting of an organization can be done.

Interpretation

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is a joint initiative of the five private sector organizations and is dedicated to providing thought leadership through the development of frameworks and guidance on enterprise risk management, internal control and fraud deterrence.

Over the years, COSO has provided guidance notes and other related material for mitigation of risks associated with Financial reporting.

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