Larger companies are leading the pack when it comes to implementation of the new 2013 COSO Framework, according to analysis by Audit Analytics and Protiviti. Data gathered from 2014 annual reports shows that over 80% of large accelerated filers disclosed using the 2013 Framework in their 2014 Internal Controls of Financial Reporting (ICFR) assessments.
But smaller companies, especially those not required to obtain an auditor opinion for their ICFRs, are lagging behind.
Companies that are required to have an auditor were far more likely to adopt the new framework than companies that are only required to have an assessment by management. 82% of companies with an ICFR audit opinion adopted the new framework, while only 37% of management-only companies adopted the new framework.
Further, over 40% of management-only ICFR filers neglected to disclose which framework was used, compared to less than one percent of filers that had an audit opinion.
Perhaps surprisingly, transition to the new framework seems to be led by foreign filers. Just over 67% of foreign filers disclosed transitioning to the new framework in their 2014 annual reports, compared to only 62% of US filers. Adoption by Canadian filers was a little slower, with about half disclosing a transition to the 2013 Framework. Overall, the adoption rate for all companies was above 60%.
The transition to the new framework is still in its early stages, but the signs are good. Although the SEC has not explicitly required companies to adopt it, there is a consensus that adoption is a de facto requirement. Most accelerated filers and large accelerated filers made the transition during fiscal 2014, and 2015 is sure to see more, with smaller filers following their lead.
Note: The analysis above is based on companies with a fiscal year after December 15, 2014.