Which organization sets standards for internal controls?

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is widely recognized for developing a framework that provides guidance for establishing and maintaining effective internal controls. COSO's Internal Control – Integrated Framework was originally introduced in 1992 and has since been updated to help organizations enhance their internal control systems. This framework identifies essential components and principles that are necessary for creating a robust internal control environment, ensuring reliable financial reporting, compliance with laws and regulations, and effective and efficient operations.

While other organizations mentioned also play important roles in the financial and accounting sectors, they do not specifically focus on setting standards solely for internal controls. The Financial Accounting Standards Board (FASB) is primarily involved in creating standards for financial accounting and reporting, whereas the International Accounting Standards Board (IASB) is responsible for international accounting standards. The Securities and Exchange Commission (SEC), on the other hand, oversees securities transactions to protect investors but does not directly set standards for internal controls. Thus, COSO is the definitive authority when it comes to internal control frameworks, making it the correct answer in this context.