GUIDANCE ON MONITORING INTERNAL CONTROL SYSTEMS (2009)

The COSO board recognises that management’s assessment of internal control often has been a time-consuming task that involves a significant amount of annual management and/or internal audit testing. Effective monitoring can help streamline the assessment process, but many organisations do not fully understand how to take full advantage of this important component of internal control. COSO’s Monitoring Guidance is designed to improve the use of monitoring by helping organisations:

• Identify and maximise effective monitoring, and
• Identify and improve ineffective or inefficient monitoring

In both instances, the internal control system may be improved, increasing the likelihood that organisational objectives will be achieved.

The culmination of two years of expert critical debate, the guidance brings together leading practices at large and small organisations and provides in-depth guidance for implementing the monitoring component of COSO’s Internal Control – Integrated Framework.

COSO’s Monitoring Guidance suggests that effective and efficient monitoring is best achieved by:

• Establishing a foundation for monitoring, including a proper tone at the top, organisational structure and a baseline understanding of internal control effectiveness
• Designing and executing monitoring procedures that seek to evaluate “persuasive” information about “key controls” addressing “meaningful risks” to organisational objectives
• Assessing results and reporting them to appropriate parties

The guidance covers these and other topics in an easy-to–read, three-volume set:

• Volume I: Presents the fundamental principles of effective monitoring and develops the linkage to the COSO Framework
• Volume II: Presents in greater detail the principles outlined in Volume I and provides guidance to those responsible for implementing effective monitoring
• Volume III: Contains examples of effective monitoring