Literature Review on Internal Control System

1755 Words Apr 20th, 2011 8 Pages
Internal control can be described as any action taken by an organization to help enhance the likelihood that the objectives of the organization will be achieved. The definition of internal control has evolved over recent years as different internal control models have been developed. This article will describe these models, present the definitions of internal control they provide, and indicate the components of internal control. Various parties responsible for and affected by internal control will also be discussed.
THE COSO MODEL
In the United States many organizations have adopted the internal control concepts presented in the report of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Published in 1992, the
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The CoCo model, which builds on COSO, is thought to be more concrete and user-friendly. CoCo describes internal control as actions that foster the best result for an organization. These actions, which contribute to the achievement of the organization's objectives, center around: * Effectiveness and efficiency of operations * Reliability of internal and external reporting * Compliance with applicable laws and regulations and internal policies.
CoCo indicates that control comprises: those elements of an organization (including its resources, systems, processes, culture, structure and tasks) that, taken together, support people in the achievement of the organization's objectives.
CoCo model recognizes four interrelated elements of internal control, including purpose, capability, commitment, and monitoring and learning. An organization that performs a task is guided by an understanding of the purpose (the objective to be achieved) of the task and supported by capability (information, resources, supplies, and skills). To perform the task well over time, the organization needs a sense of commitment. Finally, the organization must monitor task performance to improve the task process. These elements of control, which include twenty specific control criteria, are seen as the steps an organization takes to foster the right action.
In addition to the COSO and CoCo models, two other reports provide internal control models. One is the Institute of