Enterprise Risk Management and COSO: A Guide for Directors, Executives and Practitioners »

Harry Cendrowski, CPA, ABV, CFF, CFE, CVA, CFD, CFFA, is Managing Director and co-founder of Cendrowski Corporate Advisors, Cendrowski Selecky PC, and Prosperitas Group LLC. He has over twenty-five years of experience assisting firms with their corporate governance and risk management practices. Harry is also active in the private equity (PE) arena, and has assisted PE funds with their due diligence and operational activities. He frequently serves as an expert witness in the areas of forensic accounting, business valuation, and fraud investigation. He is coauthor of Private Equity: History, Governance, and Operations and The Handbook of Fraud Deterrence, both published by Wiley. Harry also serves as the Director of Fraud and Forensic Services for the International Association of Consultants, Valuators and Analysts and is coauthor of the training materials used to train every Certified Fraud Deterrence Analyst (CFD).

William C. Mair is a former partner at Touche Ross & Co. (now Deloitte), chief auditing officer, chief accounting officer, and board member of a registered investment company. He is currently a financial systems consultant. Bill has studied internal control from all angles and has written extensively on the subject. He is best known as lead author of Computer Control and Audit, a revolutionary book in the field of information systems auditing. The Information Systems Audit and Control Association (ISACA) voted Bill the fourth most influential person among the pioneers of information systems auditing in a study published by the EDP Auditor Journal.

The importance of risk management has increased in recent years as numerous accounting scandals, financial crises, and billion-dollar frauds have caused investors and organizations to lose large amounts of wealth. While practitioners, academia, and regulators have sought to define risk and develop a framework for analyzing it, an understandable, transparent approach has largely eluded directors and executives. Enterprise Risk Management and COSO introduces a holistic risk assessment methodology, building upon the original COSO framework and COSO's subsequent enterprise risk management publication. This methodology allows managers and risk assessment practitioners to accurately measure the levels of enterprise risk.

To better serve this mission, the book is divided into two sections. The first section introduces key tenets of enterprise risk management at a high level for directors and executives. The second section details quantitative risk management models for risk assessment practitioners. Within this latter section, the book presents a unique methodology to help organizations better understand and quantify the risks they face. This methodology serves as an invaluable guide to quantifying and assessing risks within selected groups of enterprise systems.

Enterprise Risk Management and COSO thoroughly provides clear-cut guidance on relevant topics including:

• Implementing successful enterprise risk management strategies

• Scalable methodologies for quantifying risks

• Verifiable predictive models of risks

• Risk analysis procedures

• Risk mitigation

About the Contributors vii

Acknowledgments xi

Preface xiii

Section I Organizational Risk Management 1

Chapter 1 An Introduction to Risk 9

Chapter 2 Key Tenets of Enterprise Risk Management 17

Chapter 3 Mitigating Operational Risks Through Strategic Thinking 39

Chapter 4 Mitigating Risks in Internal Investigations and Insurance Coverage 53

Section II Quantitative Risk Management 67

Chapter 5 Recognized Control Frameworks: COSO-IC and COSO-ERM 75

Chapter 6 Other Control Frameworks 99

Chapter 7 Qualitative Control Concepts 113

Chapter 8 Quantitative Control Relationships 151

Chapter 9 Excel Applications 179

Chapter 10 Interdependent Systems 191

Chapter 11 Documentation 203

Chapter 12 The Process for Assessing Internal Control 219

Chapter 13 Monitoring Internal Controls 239

Chapter 14 Accounting Policies and Procedures 257

Chapter 15 Business Process Applications 273

Chapter 16 General and Infrastructure Systems 285

Chapter 17 Trusted System Providers 295

Chapter 18 Reporting on Internal Control 303

Chapter 19 Review and Acceptance of Assessments 311

Glossary 317

Appendix: Internal Control Sections of the Sarbanes-Oxley Act 319

Index 323