Growing up in the Phoenix area, there was a used auto dealership called “Miracle Auto.” At one point their advertising slogan was “If it’s a good car, it’s a miracle!”
What does this mean? Were they trying to communicate that all of their cars were good…or was it truly a miracle if the car you bought from them was a good car?
Many types of businesses develop a bad reputation due to either a lack of integrity, or a perceived lack of integrity. It is refreshing that the first of 17 internal control principals in COSO’s 2013 Internal Control Framework* is…”Integrity.” The first principle simply states: “Demonstrates commitment to integrity and ethical values.”
COSO’s new framework puts these 17 principles for effective internal controls into five major categories or components: 1) Control Environment, 2) Risk Assessment, 3) Control Activities, 4) Information and Communication, and 5) Monitoring. But as COHO’s framework suggests, at the head of the pack is the idea of Integrity.
Several years ago when I was an audit manager for PwC, one of my partners and mentors continually reminded us that if we found that a client did not have integrity, that we could never audit long enough or hard enough to get comfortable with the numbers or the internal controls.
As business owners and C-level executives, we need to continually remind ourselves of the importance of honesty, truthfulness and integrity. In order for our internal controls, processes and systems to work at an optimum level, I believe that our leaders and teams must possess and demonstrate a high level of integrity.
The real question: Is your company successful because, through integrity, it is a Miracle Company… or, instead, would it be a miracle if your company is successful?
*COSO is a private-sector initiative (the Committee of Sponsoring Organizations of the Treadway Commission, or COSO for short) sponsored by the American Accounting Association, the AICPA, Financial Executives Intl, the Institute of Internal Auditors, and the Institute of Management Accountants. COSO’s updated edition of its “Internal Control – Integrated Framework” was published in May 2013. Under the Sarbanes-Oxley Act (SOX), management of publicly-traded companies are required to select an internal control framework. A majority of US publicly-traded companies have selected COSO’s frameworks. Many non-public companies also try to follow the COSO frameworks as a best practice in establishing and monitoring their internal control systems.