Accounting Information Systems: The Processes and Controls, 2nd Edition

APPENDIX A: RECENT HISTORY OF INTERNAL CONTROL STANDARDS

The written documentation regarding internal control has evolved over many years, and many parties have been involved in the effort. An example of earlier descriptions of internal control is provided by the AICPA in its Statements on Auditing Standards (SAS). One of the functions of an auditor is to examine and assess the effectiveness of internal controls. Thus, the AICPA provided guidelines as to proper internal controls and the auditor's responsibility with regard to internal controls. In 1977, the United States Congress passed the Foreign Corrupt Practices Act (FCPA) that was intended to prevent U.S. corporations from bribing foreign officials while soliciting business. That Act required corporations that sell stock in an SEC regulated stock exchange to maintain a system of internal controls. The FCPA incorporated some language from the AICPA internal control guidelines. In 1988, the AICPA issued SAS 55, which further emphasized management's obligation to maintain internal controls. In 1992, the Committee of Sponsoring Organizations (COSO) issued the COSO report, which details the findings of a comprehensive study of internal control and is recognized within the accounting industry as the definition and description of internal control.

Since that time, the AICPA has rewritten SAS guidelines to incorporate COSO concepts. SAS 55 was replaced by SAS 78 in 1994, and in 2002 SAS 78 was amended by SAS 94, the current internal ...