ACCA Strategic Business Leader (SBL) Practice Exam

When is the COSO framework primarily applied?

1. For external audits and reporting purposes.

2. To improve customer service strategies.

3. During financial performance evaluations.

4. To analyze failures in internal controls.

The correct answer is: To analyze failures in internal controls.

The COSO framework is primarily applied to analyze and enhance internal controls within an organization. It provides a structured approach for organizations to assess and improve their internal control systems, enabling them to manage risks effectively, ensure compliance with regulations, and achieve operational efficiencies. Specifically, the COSO framework focuses on the components of control environments, risk assessments, control activities, information and communication, and monitoring activities, which collectively help organizations identify shortcomings in their internal controls and make improvements. The other options, while relevant in broader business contexts, do not accurately reflect the primary application of the COSO framework. For example, external audits and reporting, improving customer service strategies, and financial performance evaluations, while important, do not specifically utilize the COSO framework as a foundational tool as much as evaluating and analyzing internal controls does. Thus, the essence of the COSO framework aligns closely with understanding and enhancing the effectiveness of internal controls within an organization, making this option the correct answer.