Question

What is the opinion based on the Treadway Commission? (See paragraphs below) Please raise thoughtful questions, analyze relevant issues, build on ideas, synthesize across readings and discussions, expand the class perspective, and appropriately challenge assumptions and perspectives.

The National Commission on Fraudulent Financial Reporting (The Treadway Commission) was formed in 1985 in response to a growing concern over fraudulent financial reporting in corporations and corruption and waste within public sector organizations. The commission was also a response to the 1977 Foreign Corrupt Practices Act (FCPA), which criminalized shady, transnational business practices and required companies under the jurisdiction of the Securities and Exchange Commission (SEC) to tighten and monitor their internal controls. The commission was created and funded by the five major accounting associations at the time: the American Institute of Certified Public Accountants (AICPA), the American Accounting Association (AAA), the Financial Executives Institute (FEI), the Institute of Internal Auditors (IIA), and the National Association of Accountants (NAA).

I believe the most important achievement of the Treadway Commission was the creation of the Committee of Sponsoring Organizations, known as the COSO Committee. In 1992, the COSO Committee issued a landmark study in the field of internal controls, titled "Internal Control: Integrated Framework," known as the COSO report. The four-volume report defines the five main components of internal controls: the control environment, risk assessment, control activities, information and communication, and monitoring. At the time, the report was one standard used by corporations and governments to assess their compliance with the FCPA. Although not 100% effective in stamping out corruption and financial fraud (see, for example, the Enron accounting scandal of the early 2000s), the COSO report was successful in that it brought the field of internal controls out of its infancy of the 1950s through 1970s. It solidified the definition of internal controls and provided sound guidance - backed by the five major accounting associations - for corporations and governments to follow. Today, per our text book, it remains the seminal document on internal controls in the U.S.

Answer 1