Accuracy of the COSO model and its time limit
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has developed a model for evaluating internal controls. This model is most accurate and accepted as a fundamental standard for internal control in every major organization. Accurate internal control determines sufficient and timely notification about material misstatement. Any deviation in internal control can result in lesser accuracy and material misstatement. The COSO model is the application of controlling the internal procedure in the ventures of Information technology (IT).
As mentioned by Rae, Sands & Subramaniam (2017), the COSO model is comprised of five stages like risk assessment, control environment, communication, information, control activities and monitoring. In case of monitoring, the COSO model helps to bring positive outcome. Through COSO model, the employees of venture are able to identify the problems related to auditing. The IT auditor needs to observe the calculation of the enterprise as no risk can be raised. Using COSO model, the auditors are able to keep record in the appropriate way. The monitoring guidance of COSO is the way of providing accurate result to the enterprise authority.
Figure 1: Five stages of COSO
On the contrary, Heise, Strecker & Frank (2014) stated that, as COSO model helps to find out risk of venture, it ensures progress of the enterprise. Before applying the model, the auditor needs to recruit employees, who are able to provide information for getting effective outcome. If the auditor of venture is able to get information about risk, they would be able to solve the risk. As the IT auditors continuously assess risk of the venture, they would be able to get solution of their problems related to their financial factors.
As COSO model helps to imply the strategy of providing accurate information, the internal systems of IT (Information technology) has been controlled. In the opinion of Babkin, Malyzhenkov & Rossi (2017), the auditors need to control the environment of the entity as environment of venture helps to maintain discipline. It ensures that the employees of IT sectors are able to complete their task in the systematic way.
In order to control the environment, the authority should focus on their system of communication. If the auditors of IT sectors are able to communicate with the higher authority of venture, they would be able to solve the risk and provide accurate outcome.
The COSO model is able to provide sufficient notification to the users for maintaining the internal systems of the ventures. Many times, it has been noticed that, the employees are not able to manage the financial department of entity in the perfect way. In this case, using COSO model, the authority can monitor the financial department constantly. Henceforth, it will be helpful for bringing positive outcome. If the authority of venture were not able to evaluate the risk like financial factors of venture, they would not be able to hold their position in the contemporary competitive market. As asserted by Hayne & Free (2014), if the employees are able to assess the risk of enterprise, they would be able to solve the risks using COSO model.
Parties involved in the audit and performance monitoring and evaluation
In the business venture, the authority needs to recruit the candidates, who observe the financial department and calculation for avoiding mistake. As mentioned by Chen et al. (2017), the auditors of the venture need to handle huge amount of money. As they need to focus on the entire financial department, there are high chances of doing mistake. In order to solve the above-mentioned problem, the authority can hire the observer. If the authority can recruit employees for performance monitoring, it would help to bring effective outcome.
For example, in many cases, it has been noticed that, the auditors do silly mistakes because of huge pressure of work. In order to solve the problems in audit, Ayagre, Appiah-Gyamerah & Nartey (2014) stated that, the authority could observe the total procedure for identifying the risk. In this case, the COSO model incorporates three volumes like Volume I, volume II, and volume III. Volume I helps to draw the framework of monitoring procedure. Volume II incorporates the principles as per the framework of the IT venture. Volume III provides the example of effective monitoring. The three stages help to control the internal procedure of the venture effectively.
On the contrary, Laxman, Randles & Nair (2014) commented that, the IT ventures follow the improvement of using COSO model in their enterprises. In this case, the higher authority of venture compares their range of profit between using COSO model and not using COSO model. The authority of IT sectors observes the existing model for monitoring the improvement of the workers. After that, they use COSO model for enhancing their improvement.
Figure 2: Evaluation of monitoring performance using COSO model
Yes, the auditors of the enterprise are able to manage the internal procedure of the venture. As other employees constantly monitor the work of auditor, the observers see silly mistakes. If the observers notice the job in the appropriate way, the higher authority would be able to see improvement in the venture. If the auditors were able to identify the risk of the enterprise, they would be able to solve it. As per COSO model, in order to imply new strategies like recruiting observer and many others, the authority can set new principles like providing training to their employees.
In the opinion of Pett, Blomster & Wallace (2015), if the employees are able to receive training related to observing the internal procedure, they can bring success for their venture. The observer is able to identify the issues using COSO model. In order to bring improvement in the performance of employees, the higher authority can provide training to their employees. On the other hand, the higher authority off IT sectors can provide motivation by increasing remuneration of the workers in order to provide motivation. Therefore, if the employees are able to get interest in time of working, it helps the venture to hold their position in the contemporary competitive market.
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