Rule Atlas
COSO: Internal Controls: The COSO Framework for Management Accountants
Under COSO (IMA / ICMA), internal Controls: The COSO Framework for Management Accountants establishes the authoritative rules tested on the IMA CMA. This lesson provides a comprehensive overview of the COSO Internal Control–Integrated Framework (2013), its five components and seventeen principles, as mandated by the CMA exam blueprint. VoraPrep verifies every threshold, worked table, and practice question below against the current IMA CMA blueprint.
Foreign Corrupt Practices Act (FCPA): Combating Global Corruption
| Provision | Requirement |
|---|---|
| Anti-Bribery | Prohibits offering, paying, or promising anything of value to a foreign official to influence an official act or decision for a business advantage. |
| Accounting (Books & Records) | Requires SEC issuers to make and keep books, records, and accounts that accurately and fairly reflect the company's transactions. Bribes are often disguised as legitimate expenses like "consulting fees" or "commissions." |
| Internal Controls | Requires SEC issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are authorized and recorded properly. This is the FCPA's own version of an internal control mandate. |
At Apex Corporation, the internal audit department discovered that several employees have been overriding the system's segregation of duties by using each other's login credentials. Which of the following control activities would be MOST effective in preventing this type of violation?
Worked Example: Compliance Risk Assessment Mini-Case
Scenario: Apex Manufacturing, a U.S.-based publicly traded company, is acquiring a smaller company in a country with a high perceived risk of corruption. As a management accountant on the due diligence team, you are tasked with identifying key compliance risks.
- Step 1: Identify Applicable Regulations SOX: As Apex is publicly traded, the acquired company's financial results must be consolidated accurately. Its internal controls over financial reporting (ICFR) must be brought up to Apex's standards to comply with SOX 404. FCPA: The acquisition target's past and future business dealings pose a significant FCPA risk. Did they pay bribes to win contracts? Are their sales agents reputable?
- Step 2: Pinpoint Specific Red Flags FCPA Risk: You discover the target company made large, vaguely described "commission payments" to a third-party agent who is related to a government official. This is a major red flag for bribery. SOX Risk: The target company uses a basic, local accounting software with poor access controls and no audit trail. This represents a potential material weakness in ICFR that must be remediated post-acquisition.
- Step 3: Recommend Control Activities For FCPA: Recommend engaging a forensic accounting firm to investigate the suspicious payments. Post-acquisition, all third-party agents must be re-vetted and put on contracts with clear anti-corruption clauses. For SOX: Develop a plan to migrate the acquired company onto Apex's ERP system within six months. In the interim, implement compensating controls, such as mandatory dual reviews and reconciliations of all key accounts.
- Therefore, the immediate priorities are to launch a forensic investigation into the potential FCPA violation and to create a detailed remediation plan for the identified SOX ICFR material weakness.
Common IMA CMA Distractors on COSO
- 1Use this framework to systematically break down any compliance-related exam question.
- 2Step 3: Match the Regulation to the Problem. Based on steps 1 and 2, select the governing regulation. Don't get distracted. A public company dealing with an FCPA issue is still governed by SOX, but the FCPA is the primary rule for the bribery question.
- 3Use this simple mnemonic to remember the core components of the FCPA:
- 4Anti-Bribery: Don't bribe foreign officials.
- 5Controls: Maintain accurate books and records and adequate internal Controls.
Frequently Asked Questions: COSO
What is the core rule under COSO (Internal Controls: The COSO Framework for Management Accountants)?
Under COSO (IMA / ICMA), internal Controls: The COSO Framework for Management Accountants establishes the authoritative rules tested on the IMA CMA. This lesson provides a comprehensive overview of the COSO Internal Control–Integrated Framework (2013), its five components and seventeen principles, as mandated by the CMA exam blueprint. VoraPrep verifies every threshold, worked table, and practice question below against the current IMA CMA blueprint.
How is COSO tested on the IMA CMA?
Use this framework to systematically break down any compliance-related exam question. Step 3: Match the Regulation to the Problem. Based on steps 1 and 2, select the governing regulation. Don't get distracted. A public company dealing with an FCPA issue is still governed by SOX, but the FCPA is the primary rule for the bribery question.
Where can I practice IMA CMA questions on Internal Controls: The COSO Framework for Management Accountants?
Test yourself instantly with the free playable IMA CMA question on this page, or launch VoraPrep's full IMA CMA adaptive question bank, interactive lessons, and 1:1 exam simulator at voraprep.com/cma.