Video: Applying COSO to Blockchain Risks in Financial Reporting

In this lesson, Nick Palazzolo, CPA, dives into the versatile application of the COSO internal control framework, especially tailored to manage blockchain-related risks in financial reporting. He explores the five key components—control environment, risk assessment, control activities, information and communication, and monitoring—demonstrating their effectiveness in addressing challenges specific to blockchain, such as smart contract vulnerabilities and regulatory compliance issues. Nick outlines how these principles can ensure integrity and reliability in blockchain transactions and enhance the safeguarding of financial data. Moreover, he identifies key risk areas and suggests robust controls, providing a comprehensive roadmap for effectively applying COSO to emerging technologies in a financial landscape.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's talk about applying the Koso internal control framework to blockchain. Now we saw our Koso, I mean, I'm just gonna say, we saw, we see Koso in a bunch of places. Uh, we saw it in our cloud computing IT infrastructure lesson here. We are going to take the Koso internal control framework, which I'm going to say it again, these five components, which, you know, prior, if you experienced, uh, the exam before 2024 were primarily on the BEC exam. These five components are generally how a good way to run your business. Now, that being said, the whole point of this framework is to be malleable, to apply to a bunch of different scenarios. So yes, you can see how having a solid control environment, assessing risks, having activities to address the risks, making sure that information and communication is being properly transmitted and then continuously and ongoingly monitoring the activities, how all this applies to just normal internal controls, like so that no one steals from the company, but also specifically how it deals with blockchain, how it deals with cloud computing. So it can be used. It's flexible for a bunch of different things. So the committee of sponsoring organizations of the treadway commission, it provides this internal control framework. We also have the ERM framework just as a reminder. Now let's see specifically, you know, it's nothing revolutionary. We have a tone, a great tone at the top regarding the importance of internal control and expected ethical behavior related to blockchain use. If we have corrupt people at the top at the C-suite level, then that's definitely a problem. We want to make sure that senior management and the board understand the actual technology and its implications for financial reporting. And like I said,

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Data Management

Module: 5 Concepts, 48 Videos

IT Infrastructure - Overview

0:25

Introduction to IT Infrastructure

4:28

Key Components of IT Architecture

4:57

Cloud Computing