Page 204 - COSO Guidance Book

 Point of focus — Addresses deviations in a timely manner

Deviations from the entity’s standards of conduct are identified and remedied in a timely and
consistent manner.

The entity should address deviations from the standards of conduct in a timely manner. The level of
remedial action, depending on the significance of the impact to the entity, may vary, but is applied
consistently across the entity.

Control environment principle 2: Exercises
oversight responsibility

4
The board of directors demonstrates independence from management and exercises oversight of the
development and performance of internal control.

The framework provides the following four points of focus for this principle:

 Point of focus — Establishes oversight responsibilities

The board of directors identifies and accepts its oversight responsibilities in relation to established
requirements and expectations.

The board of directors (those charged with governance) is involved in exercising oversight for the
development and performance of internal control through each of the five components of internal
control. This oversight of internal control point of focus is addressed in more detail in the following
information.

Point of focus — Applies relevant expertise
The framework notes that the board of directors (those charged with governance) defines, maintains,
and periodically evaluates the skills and expertise needed among its members to enable them to ask
thorough questions of senior management and take appropriate actions.
 Point of focus — Operates independently

The board of directors has sufficient members who are independent from management and objective
in evaluations and decision-making.
The framework notes that privately owned, not-for-profit, or other entities may find it costly or difficult
to attract competent independent directors. Depending on applicable requirements (regulated entities
might be required to have independent directors), the entities should identify the professional and
personal qualities of the candidate important to the entity. For example, the candidate qualifications
might include an understanding of stakeholder perspectives and having an understanding about the
entity and its environment including internal control. In unusual situations in which entities are unable
to have an independent board, the entities recognize this factor and implement different processes
and controls that result in adequate oversight.

4
Please refer to the discussion of “those charged with governance” earlier in this chapter.

© 2020 Association of International Certified Professional Accountants. All rights reserved. 3-6