Internal control over financial reporting: opportunities using the COBIT framework

Abstract

Purpose

The purpose of this paper is to analyze how the COBIT framework, integrated within the internal control framework, enables improvement in the quality of financial reporting while helping to reduce or eliminate the material weaknesses (MWs) of internal control over financial reporting (ICFR). The Control Objectives for Information and Related Technology (COBIT) model is a framework for information technology (IT) management and IT governance. It is a supporting toolset that allows managers to bridge the gap between control requirements, technical issues and business risks. Preliminarily, the analysis in this paper illustrates how the Committee of Sponsoring Organizations (COSO) framework impacts on the MWs, highlighting strengths and weaknesses. This paper shows how these limits can be overcome with the use of the COBIT framework.

Design/methodology/approach

This is a conceptual paper that aims to highlight the relationship between COBIT and COSO, by illustrating how the IT processes reduce or eliminate the main MW categories.

Findings

The analysis indicates that the implementation of the COBIT framework, or more generally the adoption of effective IT controls, provides important benefits to the entire company or organization. IT control objectives have a direct impact on the IT control weaknesses and indirectly on the other categories of material weaknesses.

Practical implications

The adoption of the framework allows managers to implement effective ICFR. In particular, the COBIT approach provides managers with a more evolved tool in terms of compliance with the Sarbanes–Oxley Act requirements. This framework also improves the reliability of financial reporting in relation to the requirements of Public Company Accounting Oversight Board’s Auditing Standards No. 2 and 5.

Originality/value

The analysis provides an interdisciplinary approach, connecting accounting and information systems themes, and suggest solutions and tools than can help managers to address the internal control weaknesses. This paper addresses an area of relevance to both practitioners and academics and expands existing accounting literature.

Citation

Rubino, M. and Vitolla, F. (2014), "Internal control over financial reporting: opportunities using the COBIT framework", Managerial Auditing Journal, Vol. 29 No. 8, pp. 736-771. https://doi.org/10.1108/MAJ-03-2014-1016