COSO Internal Controls in the Board Room
THE BOARD OF DIRECTORS IS the ultimate manager of all stockholder- and investor-owned enterprises, as well as for most large private enterprises. Directors may be either elected as outside parties from the current stockholders, known as outside or nonemployee directors, or may be directors selected from the very senior members of management, called inside or employee directors. With their tenure in office and general responsibilities based on established corporate charter and by-law documents, boards of directors are charged with independently reviewing and approving overall internal control processes and all major decisions for the enterprises they manage. They are the independent managing representatives for the stockholders, with a responsibility to make major decisions for the corporation based on their assessment of the risks and potential benefits presented to them.
The board is responsible for reviewing major internal control activities throughout the corporation and for making significant and often risk-based decisions. They are key players in a corporation to make truly enterprise-wide internal control and risk-based decisions. An effective implementation of the COSO internal control framework provides an important approach and methodology for the board of directors to make better decisions for an enterprise and its shareholder owners.
This chapter will consider the importance of corporate boards of directors in understanding ...