| SARASOTA, FLA (January 21,
2002) - The Committee of Sponsoring Organizations of the Treadway Commission
(COSO) has launched a landmark new study designed to provide guidance in
helping organizations manage risk.
COSO's goal is to provide an enterprise risk
management framework. Despite an abundance of literature on the subject, COSO
concluded that there is a need for this study to design and build a conceptual
framework and detailed application guidance.
PricewaterhouseCoopers has been engaged to lead
this extensive project, which will require approximately 10,000 hours of
professional time. The project's scope includes a comprehensive validation
process with completion targeted for 2003.
The PricewaterhouseCoopers' team will seek
input from many sources, including the members of the five COSO organizations:
The American Institute of Certified Public Accountants, The American Accounting
Association, Financial Executives International, The Institute of Internal
Auditors and the Institute of Management Accountants. A draft, conceptual
framework and application guidelines will be circulated widely for comment
prior to being finalized by COSO.
COSO embarked on this study in January 2001.
COSO believes there is consensus worldwide that all organizations can benefit
from improved risk identification and risk analysis procedures. This study
recognizes that risk and risk management is an integral part of all
organizational activities.
"This study could not be underway at a
more appropriate time," said John J. Flaherty, Chairman of COSO and
retired General Auditor for PepsiCo Inc. "With the fallout from September
11th and the Enron demise, corporations worldwide are facing a watershed in
recognizing the need for stronger risk management systems. Corporate risk
management is more critical than ever, yet until now, there hasn't been a
comprehensive framework."
The COSO study, intended for all organizations
regardless of size, will provide practical "how to" guidance to
assist organizations in building effective programs to identify, measure,
prioritize and respond to risks. COSO recognizes that while a lot of
organizations may be engaging in some aspects of enterprise risk management,
this study will help identify all of the aspects that should be present and how
they can be coordinated. Further, it will identify interrelationships between
risk and risk management, and with COSO's Internal Control - Integrated
Framework, published in 1992.
COSO has appointed an Advisory Council to work
with PricewaterhouseCoopers and manage the project. Tony Maki, a partner with
Moss Adams LLP in Seattle, Washington, will chair the council, which has
representatives from the five COSO member organizations.
The PricewaterhouseCoopers' team will be led by
Rick Steinberg, a senior partner and the firm's corporate governance leader,
and Miles Everson, the engagement partner.
AAA Member Participation
- Larry Rittenberg, University of Wisconsin,
Member of COSO Board
- Mark Beasley, North Carolina State
University, Member of COSO ERM Advisory Council
- Doug Prawitt, Brigham Young University, Member
of COSO ERM Advisory Council
COSO is a
voluntary private-sector organization dedicated to improving the quality of
financial reporting through business ethics, effective internal controls, and
corporate governance. COSO was originally formed in 1985 to sponsor the
National Commission on Fraudulent Financial Reporting, an independent
private-sector initiative which studied the causal factors that can lead to
fraudulent financial reporting and developed recommendations for public
companies and their independent auditors, for the SEC and other regulators, and
for educational institutions.
Previous COSO studies include the Report of
the National Commission on Fraudulent Financial Reporting, Internal Control -
Integrated Framework, Internal Control Issues in Derivatives Usage, and
Fraudulent Financial Reporting, 1987-1997 - An Analysis of U.S. Public
Companies.
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