The basic framework for internal controls is derived from the COSO Model developed by the Committee of Sponsoring Organizations of the Treadway Commission in 1992 (COSO). This model has become the standard for an internal control framework and provides a structure to ensure companies address the key elements that should result in an effective system of internal controls. Using the COSO Model, modified in 2013, provides a supportable approach when regulators challenge whether a company has effective internal controls.
Each business location determines the specific controls needed to accomplish each control objective. In many companies, a disparity of operating practices and accounting systems will result in different controls being needed. While this assignment may seem overwhelming, it can be done in reasonable stages, pursuant to a specific implementation plan; it does not have to be done all at once for the entire company.
Internal controls for a board or board compliance committee should be broken down into five concepts:
Risk Assessment – A board should assess the compliance risks associated with its business.
Corporate Compliance Policy and Code of Conduct – A board should have an overall governance document which will inform the company, its employees, stakeholders, and third parties of the conduct the company expects from an employee. If the company is global/multinational, this document should be translated into the relevant languages as appropriate.
Implementing Procedures – A board should determine if the company has a written set of procedures in place that instructs employees on the details of how to comply with the company’s compliance policy.
Training – There are two levels of board training. The first should be that the board has a general understanding of what the FCPA is, and it should also understand its role in an effective compliance program.
Monitor Compliance – A board should independently test, assess, and audit to determine if its compliance policies and procedures are a “living and breathing program” and not just a paper tiger.