For chief financial officers (CFOs), controllers and other financial executives, nothing is more important than ensuring that their organization functions within a financially responsible and ethically sound environment. For years, this has been made possible through the establishment, execution and management of internal controls. Much more than a set of business guidelines, well-managed internal controls serve as the backbone of operations and produce a myriad of benefits, such as improving a company's efficiency, bottom line and deterring against fraud.
However, the issue of ineffective or minimal organizational oversight has come to light in recent years as a result of challenging economic conditions and changes in the overall business climate. In 2002, many of these issues were addressed with the Sarbanes-Oxley Act, which requires organizations to adhere to a framework of internal controls, such as the framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
COSO's Internal Control-Integrated Framework is the most widely used internal control framework in the United States and has gained global acceptance in the last several years. However, it is now 20 years old and since its inception in 1992, much has changed in the business world. Of particular note are more complex business models, improved technologies and the rise of globalization. As internal controls evolved, particularly over the last decade, the COSO board found it was time to update its guidance.