COSO Framework
Definition
The COSO Framework is a widely recognized internal control framework that helps organizations manage risk, improve internal controls, and prevent fraud.
Explanation
Developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), the framework provides a comprehensive approach to internal control, risk management, and governance. It consists of five components: control environment, risk assessment, control activities, information and communication, and monitoring activities.
Many organizations use the COSO Framework to comply with regulatory requirements like SOX and to strengthen their overall risk management practices.
Example
A public company implements the COSO Framework to document and test its internal controls over financial reporting, ensuring compliance with SOX Section 404 requirements.