Hitting the 'update' button on COSO internal controls.

• Author: Hollein, Marie
• Position: President's page - Committee of Sponsoring Organizations of the Treadway Commission - Column

It's been nearly 20 years since the Committee of Sponsoring Organizations of the Treadway Commission (COSO) introduced its landmark Internal Control-Integrated Framework, which was created to assist companies in addressing many of the difficult financial challenges of the day.

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Adopted in 1992, the COSO framework provided necessary and timely input. Strong guidelines were required to help steer companies through the recession of the early '90s, and many of the tenets of that original set of principles were reflective of the economic time. Our global financial condition, however, has only grown more complicated and unruly. Finally, we're beginning to see a little light at the end of this recessionary tunnel, but no one can dispute that it's been an exhausting ride.

Much has changed since the introduction of the COSO framework. Globalization has galvanized international trade and commerce, but it's also spurred anxiety in many quarters. Uncertainty has gripped most of the economies of the developed world in ways we haven't experienced since the Great Depression.

Information technology has moved us light years beyond what we knew in the early '90s, and the regulatory landscape has shifted dramatically in just the past few years alone. International Financial Reporting Standards is a current preoccupation in the financial services world; 20 years ago, few were actively promoting such a concept of a uniform international reporting standard.

Yet, though the global economy has expanded and evolved, the COSO framework hasn't kept pace. We're moving to rectify that. FEI is one of five COSO sponsoring organizations and, as such, we feel an obligation to maintain the highest, most current standards when it comes to the implementation of internal controls. COSO has recently initiated a year-long project to update and refine the original framework.

Modernizing and Strengthening the Framework

For a long time, I thought that we'd become perhaps too complacent. But I believe that we've been far more active in recent years in sharing our thought leadership generally with the business community, regulators and other stakeholders. We've earned some experience providing important guidance to our members during critical regulatory events, including passage of the Sarbanes-Oxley Act of 2002 and offering guidance on its Section 404.

In conjunction with our fellow supporting organizations--the Institute of Internal Auditors (IIA), American...