Internal Controls (Internal Audit, Risk Management, and Compliance) Harvard Case Solution & Analysis


The Scope of COSO.. 4

Internal Controls. 4

Control Environment 5

Structure and roles. 5

Human Resource Policies. 5

Ethics & Culture. 5

Control Activities. 6

Information & communication. 6

Monitoring. 7

Characteristics of Internal Control 7

Features of sound system.. 7

Responsive Externally. 7

Integrated Internally. 8

Embedded in Culture. 8

Objectives of a Sound System.. 9

To ensure effective operations. 9

Internal Audit 9

Scale & Diversity. 10

Number of Employees. 10

New Risks. 11

Structural Changes. 11

Unacceptable Events and Failure. 11

Role of Internal Auditors. 11

Review the Events & Police the Policies. 12

Review Systems. 12

Support External Auditor Relationship. 12

Role in Risk Management 13

Risk Analysis. 14

Risk Identification. 14

Risk Assessment 14

Risk Categorization. 14

Market Risk. 14

Credit Risk. 15

Liquidity Risk. 15

Derivative Risk. 15

Legal Risk. 15

Technological Risk. 15

Environmental Risk. 16

Probity Risk. 16

Reputation Risk. 16

Strategic Risk. 16

Operational Risk. 16

Risk Assessment 17

Risk Attitude. 17

Stakeholder Analysis. 17

Risk Aptitude. 17

To Ensure Compliance. 18

To Improve Reporting. 18

References. 19




The Scope of COSO

The COSO committee regularly provides new advice to the market high-lightened current governance concerns in corporate America.

Later additions to the original framework includes the need to incorporate risk management into the general review of the state of control of an organization. In its original form, the COSO framework consists of four elements the scope of elements cover all aspects or issue that impacts on the degree of control that exists in the company. (Leitch, 2004)

Internal Controls

Internal controls are the system through which organizations are directed and controlled. It is the responsibility of both Those Charged with Governance & Management to design & implement internal control that enables the organization to meet its objectives. Internal controls are designed to monitor & control the day to day operations of the organization. The effective controls implementation will reduce the risk of error & fraud. The effectiveness of internal control depends upon the commitment of management in implementing those controls. Effective control system ensure the accuracy of accounting records, documents, timely preparation of financial statement, helps in controlling & identifying risk of material misstatement

So, a review that covers all four areas for each department of company operation should be comprehensive. (Marks, 2013)

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