Page 262 - COSO Guidance Book

 Capture information relevant to financial reporting for events and conditions other than transactions,
such as the depreciation and amortization of assets and changes in the net realizable value of
accounts receivables and provide assurance that information that must be disclosed is accumulated,
recorded, processed, summarized, and reported appropriately in the financial statements.

Standard journal entries are prepared for financial reporting purposes for accrual accounting
purposes (depreciation, for example). The owner-manager is consulted monthly concerning the
estimate of uncollectible accounts and other estimates. The owner-manager maintains the separate
ledger that contains loans to or from the owner-manager and the business for financial reporting
disclosure purposes.

The principles and associated points of focus for the information and communication component of
internal control are discussed in detail in the following material. Examples have been provided to
illustrate select points of focus.

Information and communication principle 13:
Uses relevant information

The organization obtains or generates and uses relevant, quality information to support the functioning
of internal control.

The framework provides the following five points of focus related to this principle (examples have been
included for illustrative purposes):

 Point of focus — Identifies information requirements

A process is in place to identify the information required and expected to support the functioning of
the other internal control components and the achievement of the entity’s objectives.
Information about the entity’s objectives is obtained from the board of directors (those charged with
governance) and senior management and summarized in a manner such that management and
others can understand objectives and their role in achieving those objectives.
For example, consider an entity that is a locally owned franchised restaurant. One of the entity’s
compliance objectives is to obtain a health inspection score that is consistently greater than 95%.
The criteria used by the county inspector to generate health inspection scores are obtained and
controls are designed to provide assurance that the restaurant meets or exceeds these standards.
For example, one criterion might state the refrigerator should be maintained at a certain temperature.
A control might be that a kitchen supervisor inspects and records the refrigerator’s temperature every
two hours to ensure compliance with the health department’s criterion.

 Point of focus — Captures internal and external sources of data

Information systems capture internal and external sources of data.
To continue with the locally owned franchised restaurant example, the capture of the internal source
of data would be the kitchen supervisor’s recording of the temperature on a specially designed form.
The external data would be the health department’s refrigeration temperature standard.

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