Facing hundreds of ideas for changes and worries over transition, the Committee of Sponsoring Organizations is pushing the target completion date for a rewrite of its widely accepted internal control framework into the first quarter of 2013 and is planning supplemental guidance to be issued with the final framework.

COSO received nearly 100 comment letters and an equal number of survey responses to its exposure draft of a revised Internal Control-Integrated Framework, which is relied on heavily by public companies in the United States to achieve compliance with Sarbanes-Oxley internal control reporting requirements. The rewrite was meant to modernize the 20-year-old framework to make it more consistent with modern business practices. U.S. capital market players saw it as an opportunity to call for more substantial change, and their suggestions are all over the grid.

“We received input from some that said the old framework is working well so don't do much to change it,” says COSO Chairman David Landsittel. “And we received input from some that would say we ought to start all over again with a clean sheet of paper. That illustrates the diversity of comments." The COSO board needs more time than it originally anticipated to sort through “literally hundreds of ideas,” he says. The board accepted comments through March 30 with plans to finalize the revised framework in late 2012. Now the board is allowing more time to study the feedback and finalize the framework in the first quarter of 2013.

The extended time frame also allows the board to address other concerns that cropped up during the comment period, Landsittel said. Public companies that rely on the framework to fulfill reporting requirements raised concerns about whether a December release would obligate them to apply the new framework to their 2012 reporting. “We never would have expected instantaneous application of the framework, but to issue it in the first quarter of 2013 takes away that question and takes away any pressure,” he says. COSO says it also will use the extra time to provide some supplemental guidance that was called for during the comment process – an appendix with examples to illustrate how the principles in the updated framework can be applied, and some further guidance on assessing the effectiveness of internal control.

John McLaughlin, a partner at BDO USA and a member of the COSO Task Force at the Center for Audit Quality, says the added time gives companies some welcome comfort that they won't face a scramble to update to the new framework and comply with it for 2012 year-end reporting. It also suggests the COSO board plans to take seriously the wide range of views. “It tells me that they're committed to getting it done right rather than sticking to the original time frame,” he says. “This should stand the test of time and last for another 20 years, so what's a couple of months to get it right?”

Landsittel said it's too early in the process to indicate whether the delay suggests the board might be open to more substantive changes in the framework. "We are more in the organization stage, figuring out what our process will be, than discussing the issues that have been raised," he says.

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