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Beyond Coso: Internal Control to Enhance Corporate Governance Paperback – Oct 24 2000
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From the Inside Flap
With the publication of the COSO Report in 1992, the scope of the corporate internal control function was expanded to include responsibility for compliance with an array of laws and regulations, accepted business practices, and financial reporting standards. One predictable by-product of this redefinition of internal control has been increased executive accountability. However, as author Steven J. Root clearly demonstrates in this ground-breaking book, while the Report does include a framework for assessing internal control, that framework, with its narrow focus on financial reporting, does not provide the rigorous system of checks and balances necessary in a business climate marked by ever more activist and litigious shareholders. Todays senior executives and their internal auditors need a more expansive framework than that provided by COSO, one that more closely aligns internal control concepts with the main objectives of corporate governance. Beyond COSO provides you with just such a framework. Beyond COSO begins with a philosophical/historical review of internal control concepts as they have evolved, up to and including the COSO Report. This is followed by an in-depth exploration of the crucial ethical issues surrounding the contemporary internal control function. Readers will appreciate author Steven J. Roots fascinating discussions of common lapses in ethics, the potential risks they entail, and how to avoid them. Drawing upon his extensive experience as a chief internal auditor with a Fortune 500 company and as a leading member of the Internal Auditing Standards Board, Mr. Root provides a detailed account of the internal control oversight process, with recommendations on how those responsible for internal control in North American corporations can more effectively discharge their responsibilities. He also makes a strong case for expanding the COSO-prescribed internal control criteria from 5 to 16, bringing the internal control function in line with all critical management activities, from IT development to human resource management. Finally, he offers clear, practicable guidelines for expanding the scope of any companys internal control function and transforming it from a financial oversight mechanism into a potent strategic tool for maximizing corporate performance. Beyond COSO is an invaluable working resource for internal and external auditors, CFOs, members of audit committees, and corporate directors. --This text refers to an out of print or unavailable edition of this title.
From the Back Cover
The authoritative, practical guide to internal control after COSO (Committee on Sponsoring Organizations of the Treadway Commission)
Beyond COSO unravels the complexities of the COSO Report while providing clear-cut guidelines on how to implement the various internal controls it mandates. Just as important, it builds on the COSO framework to provide a more rigorous system that corporate executives and directors can use to transform the internal control function into a valuable strategic tool for leveraging corporate strengths and improving performance.
The first practical guide to complying with COSO Report mandates, Beyond COSO:
- Clearly explains the intricacies of the COSO Report
- Describes proven techniques for complying with COSO requirements
- Provides a detailed account of the internal control oversight process
- Offers expert recommendations on how to carry out internal control responsibilities more efficiently
- Supplies a wealth of ready-to-use internal control documentation
Beyond COSO is an invaluable working resource for internal and external auditors, CFOs, members of audit committees, and corporate directors.
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So, if you're not an internal auditor, why read it? Frankly, because if you're a management consultant, it's quite a useful book (and can even be interesting). Reasons:
1. It's about internal control. Its main argument is that the COSO Framework for corporate governance is limited by its origins with the accounting profession and the Big Five; COSO is concerned primarily with internal accounting (financial) controls, only secondarily with the controls that constitute a governance framework.
2. It defines "internal control" in workable terms, proposing an alternative framework to COSO's. This framework can be exceedingly useful if you want to (1) place yourself and your consulting services in clear relation to what a business may need to have done and (2) develop checklists for diagnosing the ills of the client business.
3. It gives a thorough and even interesting account of the drivers and external stakeholders (the Foreign Corrupt Practices Act, Federal Sentencing Guidelines, the GAO, FDIC, the professional accounting organizations, etc.) influencing internal control accountability.
4. It provides deep insight into the auditor's job and the business's expectations. It provides sets of sample questions that the auditor might ask, as well as sample text for reports.
Of course, the book has some limitations. For one thing, it was published in 1998. This is not to say that it is out of date. But much has happened since, and an update would be valuable, especially since COSO has just issued (May 2013) an update to both the Framework and the Illustrative Tools for Assessing Effectiveness.
Let me propose some topics, then, for graduate theses:
1. Map the book's framework to
a. The Balanced Scorecard: Translating Strategy into Action
b. Enterprise Architecture As Strategy: Creating a Foundation for Business Execution
2. Apply its insights to
a. The mortgage lending and subprime derivatives crisis (Root discusses the S&L crisis of the 1980s and '90s as well as the derivatives scandals of the 1990s, e.g. Procter & Gamble, Barings, Sumitomo.)
b. The collapse of Enron (Root discusses the McKesson & Robbins fraud of the 1930s, as well as the place of business ethics and the "tone at the top," set by the CEO, in achieving effective corporate governance.)
Beyond COSO does have a few holes in its coverage.
1. Organizational change management is not mentioned--but, then, management implementation of changes proposed by Audit is not really within the book's scope.
2. For all its discussion of risk management and "chaos theory" (the inevitability of unpredictable, unfortunate events), there is surprisingly little attention given to contingency planning, incident management, and disaster recovery. It is as if internal control is inherently concerned only with the normal, repeating, and therefore predictable operations of the business. Succession planning gets attention, but it is never related to sudden death.
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