By Cydney Posner
This article in Compliance Week, "SEC Drops New Hint: Update to New COSO Framework," , reports that the SEC seems to be "encouraging" companies to move to the updated internal control framework from the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As you may recall, in May of this year, COSO issued an update to its original 1992 framework that was designed to preserve the core strengths of the original framework, while enhancing and clarifying it to improve ease of use and application. At the time, COSO indicated that, while users were encouraged to adopt the new framework as soon as feasible, the original framework would not be considered superseded by the 2013 framework before December 15, 2014. COSO recommended that, during the transition period, companies should clearly disclose in their reports which framework they were using. (See my article of 5/20/13.)
According to the article, in a meeting of SEC staff members with the Center for Audit Quality's SEC Regulations Committee, the staff said that, while they defer to COSO's own remarks regarding timing of the transition, the "staff indicated the longer issuers continue to use the 1992 framework, the more likely they are to receive questions from the staff about whether the issuer's use of the 1992 framework satisfies the SEC's requirement for a suitable, recognized framework," especially after December 15, 2014.
After release of the COSO updated framework, the SEC's Chief Accountant said in a speech "that the staff would monitor the transition and determine whether any SEC action would be necessary or appropriate at some point in the future. He fell short of saying the staff firmly expected all companies to transition to the new framework, leading some to wonder whether they would be safe continuing to rely on the old framework," although he noted that the framework would be superseded in December 2014. The article indicates that most companies are waiting until 2014 to begin implementing the new framework. Currently, experts do not foresee a rocky transition: a "recent survey by the Institute of Internal Auditors suggests internal auditors are not expecting significant challenge in transitioning to the new framework. More than 71 percent of internal audit executives at public companies said they expect adoption of the new framework to be not significant or somewhat significant; only 22 percent said they expect implementation to be moderately or extremely significant."