In the early years of the Twenty-first Century the United States economy was rocked in part by large corporate scandals that resulted in huge losses for many stockholders and dissolved much investor confidence. In response to these unfortunate incidents of fraudulent financial reporting, laws were passed and committees were organized in an effort to prevent them from happening again. Due to earlier scandals however, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) was formed in 1985 to initially research and create a report on forming integrated frameworks of internal corporate control. The report's revised completion in 1994 "presented a common definition of internal control and provided a framework against which internal control systems can be assessed and improved. This report is the standard that U.S. companies use to evaluate their compliance with [the 1977 Foreign Corrupt Passages Act]" (Wikipedia, 2007). Amidst the later corporate scandals in 2001, COSO developed a new framework "that would be readily usable by managements to evaluate and improve their organizations' enterprise risk management" (COSO, 2007). Today's COSO framework involves several key concepts and eight components for managing enterprise risk. These will be discussed throughout the following pages as part of a proposed plan to implement enterprise risk management (ERM) for small corporation named Laminated Board Manufacturing, Inc.
COSO Key Concepts
According to its web site, COSO maintains there are four key concepts regarding internal control's providing of reasonable assurance in achieving a company's objectives. The first is that "Internal control is a process. It is a means to an end, not an end in itself." Secondly, "Internal control is effecte ...