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COSO Launches New Study
to Provide Guidance on Assessing
and Managing Enterprise Risks

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.

Contact AAA Staff