Internal Controls… AGAIN

March 24, 2016

I originally posted this in April 2014 and I truly believe it is still very relevant and so I decided to recycle it; enjoy…

Internal Controls are really quite simple; for example, in just looking at an accounting department – preparing a well documented departmental SOP (Standard Operating Procedures) detailing each area’s (Accounts Payable AP, Accounts Receivable AR, Payroll PR, General Ledger GL) duties so that anyone could pretty much step in and do the job and then simply utilizing a “Month End Checklist” that has all the pertinent tasks on each row (bank reconciliation, GL account analysis, payroll reporting, etc.) and a column each for the initials & date of the person performing the task & the person performing the review will result in providing assurance that everyone’s work not only has a second set of eyes at some point but that they actually document the fact.

For most companies this would be a simple one sheet form that they could print off each month to fill our or fill it out online; of course you would want to have this document in your month end file for later review by the auditors. Now everyone – the company, the auditors & any other stakeholder’s – can be more confident that the Company’s financial information is accurate and reliable as can be; because, let’s face it, we all make mistakes.

This process should then be duplicated for each department in the Company and the net result is having a very good set of Internal Controls detailed through Departmental SOPs; which are then “audited” by the “Internal Audit” department for compliance. Non-compliance is not a failure but an opportunity to learn & grow by identifying outdated procedures and to change to what is actually working. So next time the “dreaded” auditors come, embrace them with a “How can you help me streamline while preserving the integrity of my work”. It’s a Win-Win situation!

I love having a second set of eyes on my work, you get so caught up in the minutia that you need that second set of eyes and that second set of perceptions. Since I am self-employed, I usually am performing that first review but I love it when I can send it to someone else & ask for a quick review (nothing worse than having a typo or a column of numbers that so clearly do not add up – it just diminishes your credibility.)

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