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Pages 8 (2008 words)
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) came into being in the year 1985 in response to increased financial reporting on the part of United States' corporations. The Treadway Commission was basically formed to support the National Commission on Fraudulent Financial Reporting, which was supposed to study the causes of misrepresentation in financial statements and provided recommendations to both companies as well as independent auditors.
The internal control environment makes the organization aware of the control process and provides a structure in which it is supposed to be carried out (Biegelman para.12). This component serves as the basis for the rest of the internal control components. The major elements of this component include corporate ethics, moral values, style of management, delegation of authority within the organization and most importantly, people management (Committee of Sponsoring Organizations). This relates to TPC in the way that the company needs to create an internal control environment through effective people management and keeping the whole organization aware about the internal control structure. Risk assessment is the component which enables the management to assess and analyze the risk associated with accomplishment of objectives (Biegelman para.12). As in TPC, the elements of risk assessment includes an analysis of all three divisions and realizing the sources which could probably lead to control failure. For this purpose, TPC must set an internal control objective and then figure out the causes which would lead to deviations from the objective.
The third component includes control activities or polic ...
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