COSO Principle 4 – Commitment to Competence

Competent implies not only intelligent but also appropriate. Appropriate in the sense of having the knowledge, qualifications and experience to accomplish the objectives, especially if the activities are highly specialized (e.g., accounting for income taxes, negotiating contracts). For the organization to define the appropriate skills requires specific identification of objectives and then relating policies, practices and expectations to these objectives at every level of the organization.

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COSO Principle 3 – Establish Structures, Reporting Lines, Authorities & Responsibilities

Creating an appropriate structure with reporting lines and the assignment of appropriate authority and responsibility is a challenging prerequisite for appropriate internal control. There is no template or one right answer for organizational structure because the structure must support the unique objectives, geography, business lines, and culture of the entity.

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COSO Principle 2 – BOD Independence & Oversight

The BOD oversight requirements extend to all five internal control components (control environment, risk assessment, control activities, information and communication, and monitoring) as well as activities that inform but are not part of the internal control system, such as setting strategic objectives for the business.

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COSO Principle 1 – Commitment to Integrity and Ethical Values

  “The organization demonstrates a commitment to integrity and ethical values” (COSO Principle 1 – Commitment to Integrity and Ethical Values http://www.coso.org/IC.htm) is the first of five principles relating to the Control Environment component of internal control.  The most important word in this principle is “demonstrates”.  For the leaders of the organization to have an effective […]

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