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Requirement of Sarbanes-Oxley to Principles of COSO Framework

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Complying with sections of the Sarbanes-Oxley Act that require internal reporting of data often requires implementing additional resources. Companies generally adopt methods such as the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework to aid in fulfilling compliance requirements.

Please help me respond to the following question: How do the requirements of the Sarbanes-Oxley Act support or contradict the principles of the COSO Framework?

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Solution Summary

The expert compares the requirements of Sarbanes-Oxley to the principles of the COSO framework.

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Introduction

In order to give a formal response to an unprecedented corporate and accounting scandal, the Sarbanes-Oxley Act of 2002 was represented (Holt, 2007). The main objective of this act is to protect the rights of investors. For this purpose, it improves the accuracy and reliability of corporate disclosures in order to make consistent to the securities law. This act officially and legally applies to Securities and Exchange Commission (SEC) registrants or publically traded companies (Ambler, Massaro, Stewart & Acre, 2005). This paper discusses the way through which requirements of the Sarbanes-Oxley Act support the principles of the COSO Framework.

Support to the Principles of COSO Framework

The Committee of Sponsoring Organizations of the Treadway Commission developed an integrated framework (COSO Framework) for the internal control of companies. Following are some reasons that show the importance of developing an understanding of the COSO framework for the application of internal control under Sarbanes-Oxley act.
- Rules that are made by the SEC and PCAOB on internal control under section 404 of Sarbanes-Oxley are largely based on the COSO framework (Rogers, 2005).
- In order to understand the principles and application of internal control under section 404 of Sarbanes-Oxley, the COSO framework and accompanying evaluation tools provide the background.
- The COSO framework is an important tool for evaluation of internal control over financial reporting by management under section 404 of Sarbanes-Oxley ...

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