THE COMMITTEE OF SPONSORING ORGANIZATIONS
OF THE TREADWAY COMMISSION (COSO)

Introduction

The Committee of Sponsoring Organizations of the Treadway Commission was organized in 1985 and was jointly sponsored by five professional organizations, American Accounting Association (AAA), American Institute of CPA (AICPA), the Institute of Internal Auditors (IIA) , the Association of Accountants and Financial Professionals in Business (IMA), and Financial Executives International (FEI). Each sponsoring organization appoints representatives to periodically work together on specific projects.

The goal of COSO is to provide leadership through the development of frameworks and guidance on enterprise risk management, internal control and fraud deterrence to enhance organizational governance and decrease fraud 1.

The History of COSO and the Creation of the COSO Framework

Due to the public criticisms against both accounting professionals and the U.S. Securities and Exchange Commission (SEC), the Treadway Commission was formed in 1985 to inspect fraudulent financial statements, especially in the aspects of reliability and accuracy.

In 1987, the Treadway Commission issued its first report on fraudulent financial reporting. COSO was created because of this report. In 1992, COSO released the report titled Internal Control-Integrated Framework, which defined the concept of internal control and established a framework on how to make internal control systems work effectively. The 1992 COSO framework contains the following five integrated components of internal control1: Control environment; Risk assessment; Control activities; Information and communication; and Monitoring. The framework was revised in 2013 and the five components mentioned above remain fundamental to the updated framework.

As the Sarbanes-Oxley Act of 2002 (SOX) was released, COSO framework became