Internal Controls Week Part 5 - Review, Review then Review

 Separation of duties is always the most critical internal controls.

A part of that separation is the review process.

If Sally writes checks, Joe should reconcile the bank statement.

If Bob does payroll, at least one owner or senior manager reviews the payroll regularly.

If an outside vendor does payroll with input from Jane, someone besides Jane reviews the payroll.

Sounds simple?  Not really.

Everybody is too busy, there are too many deadlines, the crush of daily work makes this difficult. 

BUT REVIEW IS ESSENTIAL.

   

Internal Controls Week - Part 4 - IC Quick Reference

 

INTERNAL CONTROLS (IC) QUICK REFERENCE

 

ICs are a risk prevention and a risk mitigation system; an accounting process and an element of organization’s culture

 

Segregation of duties IS THE MOST IMPORTANT control

 

The objective is reasonable assurance NOT perfection

 

Basic techniques are well known and must be implemented

 

          Policies and procedures custom designed for organization

          Employee screening, training, retraining and supervision

          Relentless (not nasty) supervision and support

          Accounting system elements design fitted to the company

                   Approval and authorization

                   Document movement and retention paths

                   Physical control of assets

                   Verification processes

                   Reconciliations of transactions/documentation/ cash

                  

Information system controls designed for the organization

External review and audit used as required

 

Internal controls Week Part 3 - Employee Theft

 

https://tomealey.substack.com/p/types-of-employee-theft

Internal Controls Week Part 2 - Risk Management

 Risks, including financial risks,  can be battled with a well-known set of management principles.

 

The primary rule of risk management is PREVENTION with internal controls, then

 

If a risk event happens, detect and mitigate the damages, then

Use risk transfer to mitigate damages (usually insurance), then

Prevent recurrence of the risk event

Internal Controls Week Part 1

 Internal Controls Defined

 What do we mean by internal controls?  How are internal controls defined?

 The rules and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

 Definition by the: Committee of Sponsoring Organizations. COSO was organized in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, 

 

 Our comment:

 The controls, policies and procedures customized for the organization – type of business, product/service, ownership format, physical location, work force and location.

Excepted from 

Internal Controls and Embezzlement Protection

Small Business Edition    (c) Tom Ealey 2024

Now is the Time! (Year End Governance)

 The New Year triggers a lot of accounting, tax and governance issues and tasks.

Now is the time to get organized and get a checklist together of year end and year beginning tasks.

The key players in this are your accountants and your legal counsel. The accountant for certain, and maybe the legal counsel. 

Ignoring governance tasks, such as board meetings, can have no consequences or huge consequences.

Do not have a relationship with a business law attorney? This is the year to fix that omission.

Happy New Year!