RGP brought us a second COSO webinar hosted by these Audit, Risk, Finance and Accounting experts:
Watson kicked off RGP’s follow-up webcast with a recap of the highlights of the first session hosted a couple of months ago that addressed effective implementation of the updated COSO Framework. She noted that the framework is not significantly different from the first version of COSO’s Internal Control Integrated Framework published in 1992. The most notable change is that the 17 Principles that were introduced in language that was embedded in the earlier version have now been called out and defined more formally in this latest version.
Evidenced by a session polling question, a significant number of companies have now moved into the planning stage and are beginning the process of mapping their controls to Points of Focus or Principles. Remember that companies using the COSO framework must demonstrate that all 17 Principles are present and functioning, but the Points of Focus are not required. While COSO says that the Points of Focus are intended to be considerations, Les Sussman noted that we are finding that many companies are mapping to the Points of Focus and using them as a checklist of sorts to help with the mapping process.
In the project timeline review, Sussman noted the importance and value of checking in with your external auditors early and often. He urged attendees to get started as soon as possible as those with a December Fiscal Year End will be expected to demonstrate adequate coverage of COSO’s 17 Principles by the end of this year.
John Digenan further emphasized Sussman’s point that the mapping process was not particularly time consuming. The mapping portion of the project is pretty straightforward and can go pretty quickly—as it did for Microsoft. The process of updating and validating controls is really what takes the lion’s share of time in this transition process.
The team examined and reviewed three case studies, involving Microsoft, a large telecommunications company ($128B) and a smaller mining company ($1.5B). In each of these cases, the company performed an initial bottom up approach; mapping entity level controls to related COSO Principles. All three considered the COSO Points of Focus to help them with the gap analysis and remediation process (although some did not formally document gaps and remediations in this early stage of the process). Each organization had similar findings to John’s regarding time spent on mapping. This part of the process went pretty quickly (in a week or two). All found the early involvement of external auditors to be helpful. Another common finding was that so-called “missing” controls were being performed, but were not formally documented and tested. Even in the largest organizations, only about a dozen controls needed to be documented.
The team also presented some of the challenging issues (and the associated “good news”) for this 2013 COSO Framework implementation project:
Les Sussman took a moment to remind attendees that RGP owns a GRC application (a SOX tool, among other uses) and highlighted the 4 simple steps that an existing policyIQ client can work through in about an hour to have all COSO Principles and Points of Focus properly documented, linked and filed in policyIQ to prepare for the mapping process. For those companies who have properly licensed (purchased) the 2013 COSO Internal Control – Integrated Framework, RGP’s policyIQ team can help clients with the importing of COSO Principles and Points of Focus by providing import templates that are pre-populated and ready to go. Configuration guidance for brand new policyIQ clients is also included in the affordable policyIQ licensing fees (generally about 1/10th the cost of comparable competitors). Contact us (support@policyIQ.com) for more information on using policyIQ for management of your SOX and COSO processes and related documentation.
Shauna Watson, Les Sussman and John Digenan wrapped up the session with a question and answer period. Among the flash items discussed:
- Assuming you used a top-down, risk-based approach before, the COSO framework does not change your approach. In fact, apply that mentality to other areas (non-financial areas) following the AS5, top-down, risk-based approach.
- The Fraud Risk Assessment is certainly part of the broad Risk Assessment. It can be performed and documented as an integrated part of the formal Risk Assessment. Note that, while it is not required, a separate Fraud Risk Assessment can be very helpful for addressing your organization’s anti-fraud considerations and your coverage of COSO’s Principle #8.
- Some companies have observed a differences in terminology related to the significance of deficiencies identified (material weakness vs major deficiency). Sussman noted that the framework is clearly guides companies to default to any regulatory regime used to evaluate deficiencies. With regard to SOX, we will continue to use SOX language.
- Digenan also clarified that the new controls added at Microsoft were entity level controls and noted that the initial mapping process involved only entity level controls, not transaction level controls.
You may follow this link to review a recording of the webinar which goes into much more detail on the case studies and helpful resources. For more information regarding your COSO implementation project, reach out to us and we will put you in touch with a expert in your area. You may also contact us for help with your policyIQ implementation. We can show you how to make quick work of your gap analysis and control rationalization tasks. Let’s get started today—we’ll have you up and running in no time!