Corporate Compliance

Tip: Use COSO to deal with risks

Compliance Monitor, July 14, 2004

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The Council of Sponsoring Organizations (COSO) of the Treadway Commission's enterprise risk-management model is a popular tool for identifying, measuring, prioritizing, and responding to risks, says Brenda Parnell, MBA, corporate-compliance auditor for Alaska Native Medical Center in Anchorage.

According to the COSO model, internal controls consist of the following eight interrelated components, says F. Lisa Murtha, Esq., a principal in the Philadelphia-based office of Parente Randolph, LLC:

  • Monitoring: Ongoing examination during the course of operations
  • Information and communication: Ensuring that information flows both up and down the chain of command
  • Control activities: Policies and procedures to ensure that the organization carries out management directives
  • Risk response: Organizational risk tolerance
  • Risk assessment: Establishing consistent objectives throughout the organization-these objectives form a basis for how the organization should manage risks
  • Event identification: Management considers internal and external factors that might affect its achievement of objectives
  • Objective setting: Ensuring that the organization aligns objectives with strategic goals
  • Control environment: The "tone at the top" of an organization and an employee's overall understanding of internal controls



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