Gisya Nafilah AIS Assignment

Accounting Information System and Management
Information System Assignment Summary concept of

framework of internal control COSO, COBIT, ERM.
Lecturer :
Sir Safiq
Arranged by :
Gisya Nafilah
(0082202300048)
Accounting Class 1
COBIT Framework
The Information Systems Audit and Control Association (ISACA) developed the Control
Objectives for Information and Related Technology (COBIT) framework. COBIT consolidates
control standards from many different sources into a single framework that allows (1)
management to benchmark security and control practices of IT environments, (2) users to be
assured that adequate IT security and controls exist, and (3) auditors to substantiate their internal
control opinions and to advise on IT security and control matters.
The COBIT 5 framework describes best practices for the effective governance and management
of IT. COBIT 5 is based on the following five key principles of IT governance and management.
These principles help organizations build an effective governance and management framework
that protects stakeholders’ investments and produces the best possible information system.
1. Meeting stakeholder needs. COBIT 5 helps users customize business processes and procedures
to create an information system that adds value to its stakeholders. It also allows the company to
create the proper balance between risk and reward.
2. Covering the enterprise end-to-end. COBIT 5 does not just focus on the IT operation, it
integrates all IT functions and processes into companywide functions and processes.
3. Applying a single, integrated framework. COBIT 5 can be aligned at a high level with other
standards and frameworks so that an overarching framework for IT governance and management
is created.
4. Enabling a holistic approach. COBIT 5 provides a holistic approach that results in effective
governance and management of all IT functions in the company.
5. Separating governance from management. COBIT 5 distinguishes between governance and
management.
COBIT 5 is a comprehensive framework that helps enterprises achieve their IT governance and
management objectives. This comprehensiveness is one of the strengths of COBIT 5 and
underlies its growing international acceptance as a framework for managing and controlling
information systems.
COSO’s Internal Control Framework

A COSO framework that defines internal controls and provides guidance for evaluating and
enhancing internal control systems.
The Committee of Sponsoring Organizations (COSO) consists of the American Accounting
Association, the AICPA, the Institute of Internal Auditors, the Institute of Management
Accountants, and the Financial Executives Institute. In 1992, COSO issued Internal Control—
Integrated Framework (IC), which is widely accepted as the authority on internal controls and is
incorporated into policies, rules, and regulations used to control business activities. In 2013, the
IC framework was updated to better deal with current business processes and technological
advancements. For example, in 1992, very few businesses used the Internet, sent e-mail, or
stored their data in the cloud. The revised IC framework also provides users with more precise
guidance on how to implement and document the framework. Many new examples have been
added to clarify framework concepts and make the framework easier to understand and use. The
new IC framework keeps the five components of the original framework and adds 17 principles
that build on and support the concepts. Each of the five components has at least two and up to
five principles. The five components and 17 principles of the updated IC framework are
summarized in Table 7-1.
COSO’s Enterprise Risk Management Framework
To improve the risk management process, COSO developed a second control framework called
Enterprise Risk Management—Integrated Framework (ERM). ERM is the process the board of
directors and management use to set strategy, identify events that may affect the entity, assess
and manage risk, and provide reasonable assurance that the company achieves its objectives and
goals. The basic principles behind ERM are as follows:
● Companies are formed to create value for their owners.
● Management must decide how much uncertainty it will accept as it creates value.
● Uncertainty results in risk, which is the possibility that something negatively affects the
company’s ability to create or preserve value.
● Uncertainty results in opportunity, which is the possibility that something positively affects the
company’s ability to create or preserve value.
● The ERM framework can manage uncertainty as well as create and preserve value.
COSO developed the ERM model shown in Figure 7-3 to illustrate the elements of ERM. The
four columns at the top represent the objectives management must meet to achieve company
goals. The columns on the right represent the company’s units. The horizontal rows are the eight
interrelated risk and control components of ERM. The ERM model is three dimensional. Each of
the eight risk and control elements applies to each of the four objectives and to the company
and/or one of its subunits. For example, XYZ Company could look at the control activities for
the operations objectives in its Pacific Division.
The Enterprise Risk Management Framework versus the Internal Control Framework
The IC framework has been widely adopted as the way to evaluate internal controls, as required
by SOX. The more comprehensive ERM framework takes a risk-based rather than a controls-
based approach. ERM adds three additional elements to COSO’s IC framework: setting
objectives, identifying events that may affect the company, and developing a response to
assessed risk. As a result, controls are flexible and relevant because they are linked to current
organizational objectives. The ERM model also recognizes that risk, in addition to being
controlled, can be accepted, avoided, diversified, shared, or transferred. Because it is more
comprehensive, the text uses the ERM model to explain internal controls. If one understands the
ERM model, it is easy to understand the IC model, as it is 5 of the 8 components of the ERM
model. It is harder to go from understanding the IC model to understanding the ERM model, as
the user may not be familiar with the three additional components. The eight ERM components
shown in Figure 7-3 are the topic of the remainder of the chapter

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Accounting Information System and Management

Information System Assignment Summary concept of

COSO’s Internal Control Framework

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