2013 Internal Control - Integrated Framework Update: Raoul Ménès, Principal Ménès Consulting Group, LLC

2013 Internal Control –
Integrated Framework Update

January 28 – February 7, 2019
Raoul Ménès, Principal

Ménès Consulting Group, LLC
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2013 Internal Control –
Integrated Framework Update
2013 Internal Control - Integrated Framework
Update*
• Consists of three volumes:
• Executive Summary
• Framework and Appendices
• Illustrative Tools for Assessing
Effectiveness of a System of Internal
Control
• Sets out:
• Definition of internal control
• Categories of objectives
• Components and principles of internal
control
• Requirements for effectiveness
*2013 Internal Control – Integrated Framework © [2013] Committee of Sponsoring Organizations of the Treadway Commission (COSO). All rights reserved. Used with permission.
Update*
Update expected to increase ease of use and broaden application
What is not changing... What is changing...
• Core definition of internal control • Changes in business and operating

environments considered
• Three categories of objectives and
five components of internal control • Operations and reporting objectives
expanded
• Each of the five components of
internal control are required for • Fundamental concepts underlying
effective internal control five components articulated as
principles
• Important role of judgment in
designing, implementing and • Additional approaches and
conducting internal control, and in examples relevant to operations,
assessing its effectiveness compliance, and non-financial
reporting objectives added
Update*
Update considers changes in business and operating environments
Environments changes... …have driven Framework updates
Expectations for governance oversight
Globalization of markets and operations
Changes and greater complexity in business

Demands and complexities in laws, rules,
regulations, and standards
Expectations for competencies and
accountabilities
Use of, and reliance on, evolving technologies
Expectations relating to preventing and
detecting fraud COSO Cube (2013 Edition)
Update*
Update articulates principles of effective internal control
Update*
Update*
Update*
Update*
Update*
Update*
Update clarifies requirement for effective internal control:
• Effective internal control provides reasonable assurance regarding the achievement of

objectives and requires that:
• Each component and each relevant principle is present and functioning;
• The five components are operating together in an integrated manner
• Each principle is suitable to all entities; all principles are presumed relevant except in
rare situations where management determines that a principle is not relevant to a
component (e.g., governance, technology)
• Components operate together when all components are present and functioning and
internal control deficiencies aggregated across components do not result in one or more
major deficiencies
• A major deficiency represents an internal control deficiency or combination thereof that
severely reduces the likelihood that an entity can achieve its objectives.
Update*
• Points of focus may not be suitable or relevant, and others may be

identified
• Points of focus may facilitate designing, implementing and conducting
internal control
• There is no requirement to separately assess whether points of focus are in
place.
Update*
• The Framework does not prescribe controls to be selected, developed, and

deployed for effective internal control
• An organization’s selection of controls to effect relevant principles and associated
components is a function of management judgment based on factors unique to
the entity
• A major deficiency in a component or principle cannot be mitigated to an
acceptable level by the presence and functioning of other components and
principles
• However, understanding and considering how controls effect multiple principles
can provide persuasive evidence supporting management’s assessment of
whether components and relevant principles are present and functioning.
Update*
Update describes how various controls effect principles:
Mitigating Risks. Creating Value. Delivering Results.®

2013 Internal Control - Integrated Framework Update: Raoul Ménès, Principal Ménès Consulting Group, LLC

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2013 Internal Control - Integrated Framework Update: Raoul Ménès, Principal Ménès Consulting Group, LLC

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2013 Internal Control –

Integrated Framework Update

Raoul Ménès, Principal

• Core definition of internal control • Changes in business and operating

Expectations for governance oversight

Globalization of markets and operations

Changes and greater complexity in business

• Effective internal control provides reasonable assurance regarding the achievement of

• Points of focus may not be suitable or relevant, and others may be

• The Framework does not prescribe controls to be selected, developed, and

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