Strong internal controls are important to reduce mistakes, oversights and fraud. If someone told you that you could improve internal controls by slightly changing a process, and for no cost to the company, would you? Ask yourself these questions:
- Are journal entries approved before being posted to the accounting system?
- How engaged is your company’s board of directors or oversight committee?
- Is there an initial control listing of cash received and is this listing agreed to the deposit receipt from the bank by someone outside of the cash receipts process?
- Do electronic fund transfers require approval by another person within the company before they are processed by the bank?
- Are bank reconciliations reviewed and approved?
- Do checks over a certain dollar threshold require two authorized signatures?
- Is there a periodic review of employee user access privileges to network systems and applications?
- Are network passwords required to be changed at least quarterly?
Let’s assume that all of your answers to the questions above are “yes”. The next question is, are these procedures and the related controls memorialized in a policy manual? This step is just as important as having the controls themselves, as it makes for clear processes and expectations of employees. In addition, if the company experiences turnover, having a policy manual allows for internal control to remain strong while new personnel are becoming familiar with their job responsibilities.
If the answers to the above questions are “no” then it may seem overwhelming to start the process of implementing all these controls. However, if the controls are implemented one at a time, the task may not be as difficult as it may seem. One recommendation is to try implementing one of the items above each quarter.
Regardless of your current situation, if you get your employees on board and ensure they understand their part in the process, strong internal controls will become part of your company culture.
If you would like additional information, feel free to contact:
Amy Menefee, Business Assurance & Advisory Services Audit Senior Manager
804.418.6296 | firstname.lastname@example.org