Article
Mitigate risk and strengthen financial statements with internal controls
Feb. 7, 2024 · Authored by Francisco Sarmiento, Matt Doxtator
Internal controls aren’t an all-or-nothing proposition. Just a handful of foundational controls can significantly improve an organization’s risk management and the reliability of its financial data. The difficulty lies in knowing which controls have the greatest impact — and how to strengthen them.
Learn how your organization can improve the reliability of its financial statements with the following topics:
What are internal controls?
Many internal control frameworks exist that attempt to define what good internal control looks like. The most recognizable and trusted of these is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control-Integrated Framework. It defines the underlying principles of an effective system of internal control over the following:
- Reliability of financial reporting
- Effectiveness and efficiency of operations
- Compliance with applicable laws and regulations
To do this, COSO established five integrated components, 17 principles, and 87 points of focus. The COSO framework is a comprehensive and robust resource for establishing an internal control environment that’s adaptable to various business environment, responsive to risks to the organization, and supportive of good governance. However, its complexity can limit its utility in some cases.
It’s not uncommon for small to midsized organizations to dismiss the COSO framework as something for large public companies. Those that attempt to implement the framework often get lost in the details and forget its purpose. However, selectively applying some of COSO’s internal controls is often beneficial for most organizations, no matter their size.
