10-03-2009, 11:21 PM
Dotkom,
I have replied your e-mail
Following was the reply sent there (with bit modifications)-
This is, you know, the peak of audit season. Further, I may have to be out of the scene for some days due to my foreign visit (subject to visa availability). This has enhanced the pressure further.
I know you would be seeing me answering other questions on the forum but not yours. I answer only those questions for which I donât have to look at any material (at least in detail) and which I can write in 3 to 5 minutes or so. Your issue asks me to develop personal understanding on the subject matter before discussing it with you IN DETAIL. I was not personally engaged in any COSO audit.
However, the simple understanding about why COSO is better for banking sector (without going into a technical SWOT analysis) is that it is USA based framework that has been backed up by 5 major US institutes/associations like AICPA, IIA, Financial Executives International, American Accounting Association, and the Institute of Management Accountants (members of the Committee of Sponsoring Organizations of Treadway commission). These bodies are recognized world over and have a louder voice on the globe. Totally independent of each of the sponsoring organizations, the Commission contained representatives from industry, public accounting, investment firms, and the New York Stock Exchange as well.
All major banks deal in foreign markets either for deposits, money market transactions, raising equities and funds and capital market game play. The utmost important foreign market is US or Europe that itself is the biggest follower and is substantially influenced by US. Most of European locations have witnessed a favor given to COSO when choosing for a framework.
Further, some banks have or are in the process of listing their securities in cross border stock markets. Examples are GDRs or ADRs. Currently Pakistani Banks are focusing European markets. However, the biggest market is of US I must say and it is always in the eyes of the banking sector. This makes COSO far more attractive for banking sector so that whenever they get into that bigger global market, the compliance does not raise any issue.
Besides having louder voice, it is also a fact that members of treadway commission included the legendary institutions/people and none other framework in the world has been developed through such a long phase of developments and improvements. None of the other framework has been backed by such recognized quality institutions and accountancy legends.
You must know that the COSO's 1992 version was heavily criticized in various commentaries. Examples included the comments given by "Paisley", and "PWC". Still on certain COSO pronouncements there are coming various comments to improve certain things, like role of board of directors, non shifting of management decisions on auditors (indirectly) etc. Such comments, criticism has made COSO somewhat globally recognized, discussed, understood and accepted framework.
I am also of the view that COCO is not that attractive since it is much confined to the legal environment of one country and is not that much debated and practiced any where. Besides this, the development of COCO has not witnessed the process which COSO has undergone.
I also mention, that as per my knowledge except for COSO there is no that worldly popular and known framework available. SBP asked banks to follow some international framework for internal controls. Its circular did not mention that such framework should be COSO only. However, banks in specific and other industries in general prefer COSO.
The above mentioned is the major reason that causes attractiveness for COSO and makes it more popular. If you need to know differences with other frameworks, if any, or technical aspects, it will be a very long discussion; rather studying of a complete subject altogether.
Regards,
KAMRAN.
I have replied your e-mail
Following was the reply sent there (with bit modifications)-
This is, you know, the peak of audit season. Further, I may have to be out of the scene for some days due to my foreign visit (subject to visa availability). This has enhanced the pressure further.
I know you would be seeing me answering other questions on the forum but not yours. I answer only those questions for which I donât have to look at any material (at least in detail) and which I can write in 3 to 5 minutes or so. Your issue asks me to develop personal understanding on the subject matter before discussing it with you IN DETAIL. I was not personally engaged in any COSO audit.
However, the simple understanding about why COSO is better for banking sector (without going into a technical SWOT analysis) is that it is USA based framework that has been backed up by 5 major US institutes/associations like AICPA, IIA, Financial Executives International, American Accounting Association, and the Institute of Management Accountants (members of the Committee of Sponsoring Organizations of Treadway commission). These bodies are recognized world over and have a louder voice on the globe. Totally independent of each of the sponsoring organizations, the Commission contained representatives from industry, public accounting, investment firms, and the New York Stock Exchange as well.
All major banks deal in foreign markets either for deposits, money market transactions, raising equities and funds and capital market game play. The utmost important foreign market is US or Europe that itself is the biggest follower and is substantially influenced by US. Most of European locations have witnessed a favor given to COSO when choosing for a framework.
Further, some banks have or are in the process of listing their securities in cross border stock markets. Examples are GDRs or ADRs. Currently Pakistani Banks are focusing European markets. However, the biggest market is of US I must say and it is always in the eyes of the banking sector. This makes COSO far more attractive for banking sector so that whenever they get into that bigger global market, the compliance does not raise any issue.
Besides having louder voice, it is also a fact that members of treadway commission included the legendary institutions/people and none other framework in the world has been developed through such a long phase of developments and improvements. None of the other framework has been backed by such recognized quality institutions and accountancy legends.
You must know that the COSO's 1992 version was heavily criticized in various commentaries. Examples included the comments given by "Paisley", and "PWC". Still on certain COSO pronouncements there are coming various comments to improve certain things, like role of board of directors, non shifting of management decisions on auditors (indirectly) etc. Such comments, criticism has made COSO somewhat globally recognized, discussed, understood and accepted framework.
I am also of the view that COCO is not that attractive since it is much confined to the legal environment of one country and is not that much debated and practiced any where. Besides this, the development of COCO has not witnessed the process which COSO has undergone.
I also mention, that as per my knowledge except for COSO there is no that worldly popular and known framework available. SBP asked banks to follow some international framework for internal controls. Its circular did not mention that such framework should be COSO only. However, banks in specific and other industries in general prefer COSO.
The above mentioned is the major reason that causes attractiveness for COSO and makes it more popular. If you need to know differences with other frameworks, if any, or technical aspects, it will be a very long discussion; rather studying of a complete subject altogether.
Regards,
KAMRAN.
