The COSO 2013 Framework and Accounting Information System

The COSO 2013 Framework and AIS
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The COSO 2013 Framework and AIS
Introduction
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its first Internal Control-Integrated Framework (ICIF) in 1992. The framework was revised in 2013. Initially, ICIF defined crucial concepts in internal control and provided guidance to organizations on how to introduce, assess, and enhance internal control (Schandl & Foster, 4). In particular, internal control involves a process created and implemented by finance and management professionals. The framework facilitates operational effectiveness and efficiency, compliance with applicable regulations, and proper financial reporting. For example, Sarbanes-Oxley Act (SOX) was implemented in 2002. SOX mandates companies in the United States of America (USA) to use suitable internal control financial reporting frameworks. In that light, many organizations in the USA use COSO 2013 Framework to adhere to Section 404 of SOX. The paper focuses on how John Hopkins Hospital can benefit from the control environment, information and communication, and monitoring activities, some of the primary components of internal control. 
COSO 2013 Framework Elements that Focus on Internal Control
The Control Environment
The control environment entails a set of standards, structures, and processes that facilitate internal control in an organization. Based on the Institute of Internal Auditors (IIA), a well-established control environment lead to the creation and implementation of an effective internal control system that can enhance the operations of a healthcare organization. In particular, it demonstrates integrity and commitment, enforces accountability, responsibility oversight, shows commitment to competence, and establishes authority, structure, and responsibility (Schandl & Foster, 4). The management team of John Hopkins Hospital can use the control environment to implement proper medical procedures and policies to be followed. For example, the best performing and competent employees should be rewarded to remain in an organization for an extended period. In addition, the control environment is tied to the process of financial reporting in a firm. A proper control environment can foster accountants’ and internal auditors’ transparency and integrity when dealing with the financial data and generating statements. Notably, it can discourage fraudulent activities, financial data misstatements, and data manipulation and promote creative accounting practices. As a result, the generated financial reports would be highly reliable and accurate, leading to proper strategic decision-making.
Information and Communication
In a large healthcare organization, such as John Hopkins Hospital, how information is channeled to different departments and employees significantly determines the effectiveness of the firm’s operations and financial reporting. The management team obtains relevant information from external and internal sources (Schandl & Foster, 4). As such, managers are mandated to establish the most effective communication strategy to ensure that primary stakeholders are well-informed. The dissemination of information in an organization can be done through internal memos, meetings, sending emails, and phone calls. Effective internal communication ensures that senior leaders can reach every employee in a firm and that the information is interpreted correctly. The information and communication related to financial reporting since accountants and other financial experts must be reminded and updated on proper ways to generate accurate financial reports (Chiu & Wang, 1). For instance, John Hopkins Hospital ought to use the recommended formats of cash flow statements, balance sheets, shareholders’ equity statements, and income statements based on the USA Securities and Exchange Commission (SEC) guideline. Whenever anything changes in how financial reporting should be done, COSO’s information and communication component facilitate quick message delivery to respective recipients.
Monitoring Activities
Another significant component of internal control that influences the process of financial reporting in a healthcare organization is monitoring activities. Specifically, monitoring activities entail periodic evaluations to ensure that all elements of internal control are in line with the established principles, policies, and guidelines. When it comes to financial reporting, the senior management should conduct regular evaluations of the organization’s financial data (Dickins & Fay, 2). For example, a firm should not over-rely on internal financial audits throughout. In some cases, it is crucial to audit the finances of a company by using an external auditor company. Besides, some accountants might engage in fraudulent activities, such as manipulating the financial data, to give the firm the wrong impression. Others can manipulate the financial statements of a poorly performing firm to sustain investors. However, monitoring activities can ensure that the firm’s financial position is reflected from its statements since accurate data is used to generate credible financial reports. That way, the management can make proper strategic decisions to facilitate the success of a company’s future.
A Method in an Accounting Information System (AIS) that can be Integrated into the Healthcare Industry to Improve John Hopkins Hospital Operational Efficiency
An AIS is crucial for a healthcare organization since it facilitates financial data collection, management, storage, processing, retrieval, and reporting. The primary stakeholders of an AIS system are senior managers, tax agencies, accountants, chief financial officers, business analysts, regulators, and auditors. In addition, the main components of an AIS are software, internal controls, people, data, information technology infrastructure, and instructions and procedures. The most appropriate method to be integrat...