COSO Small Business Guidance Issued 

July 12, 2006

FEI Summary

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued its new publication, Internal Control over Financial Reporting - Guidance for Smaller Public Companies, on July 11, 2006. 

As stated in the document’s Executive Summary, the document neither replaces, nor modifies the original COSO “Internal Control-Integrated Framework,” but rather provides guidance – by means of 20 basic principles, supporting attributes and illustrative examples and approaches – on how to apply the original COSO framework. The Executive Summary also notes that while the document is directed at smaller public companies, it is also usable by larger ones, in applying the original COSO framework to design and implement cost-effective internal control over financial reporting.

Although the guidance is designed primarily to help management with establishing and maintaining effective internal control over financial reporting, the Executive Summary also states it may be useful to management in more efficiently assessing internal control effectiveness, in the context of assessment guidance provided by regulators.

SEC Statement regarding COSO's new guidance

In a statement issued by the SEC on July 11, SEC Acting Chief Accountant Scott Taub said, "This guidance will help smaller companies more efficiently and effectively implement the Section 404 internal control requirements." Taub added the guidance, "will also help companies of all sizes understand and apply the fundamental concepts of COSO's internal control framework." SEC Director of Division of Corporation Finance John White added, "This guidance is an important part of improving the implementation of Section 404 so that it will work efficiently and effectively. I expect it will help the Commission as we proceed with our announced plans to develop guidance for management on how to assess its internal control over financial reporting." [NOTE: See FEI Summary of SEC Concept Release on management reporting under Sarbanes-Oxley Section 404, issued July 11.]

FEI members get discount on purchasing COSO Guidance 

COSO's "Guidance for Smaller Public Companies," issued on July 11, is available for purchase here. As FEI is one of the sponsoring organizations of COSO, FEI members can obtain the document at a discounted rate by entering the coupon number shown on the order page. Those ordering print copies by August 31 can also obtain a pdf version free.

The Executive Summary and related FAQ's are available for free download from COSO's website, www.coso.org. In anticipation of heavy web traffic to COSO's website, direct links to COSO's press release, Executive Summary, Frequently Asked Questions (FAQ), and related information is provided under "Related Files" below.

Free Webcast explains the guidance

A free webcast explaining the new guidance was hosted by COSO on July 11, and an archived version of the webcast is available here .

FEI, a sponsoring organization of COSO, supports strong internal control

FEI, one of the five sponsoring organizations and founders of COSO, supports the need for strong internal control by companies of all sizes.

FEI’s representative on the COSO board is Nick Cyprus, and its representative on the COSO Project Task Force for the small business guidance is Serena Dávila, Director, Technical Activities in FEI’s Washington, DC office. Additionally, a number of FEI members participated in the COSO Project Task Force.

Updated July 12, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion, unless specifically noted above.