Services > Internal Controls
Internal Controls
Establishing and maintaining sound and practical internal controls for any company, organization or governmental agency ensures that every transaction is properly authorized, approved, recorded, documented and reflected within financial statements and reports. Properly designed internal controls are also the primary defense against employee theft and embezzlement.
In a perfect world every employer would have ample employees to properly segregate each and every function, with one individual initiating a transaction and a second, independent individual (preferably an owner or member of senior management) approving each transaction. The reality is, with today’s business and economic climates, many employers have less resources and capacity to accomplish all the tasks needed simply to remain functioning. Segregating duties is often no longer an option when insufficient resources exist.
In order to implement the best internal controls possible, each engagement must be designed and executed based on the specific facts and situation of each entity, given the available resources and willingness of other individuals, such as members of senior management, owners and board members, to participate in fulfilling critical roles to ensure the financial integrity of the organization.
Assessments of internal controls of any organization must identify both opportunities for unauthorized or fraudulent activity, as well as practical recommendations to be implemented based on the organization’s systems and resources. The end result will not yield a “fraud-proof” system of internal controls, as no system can guarantee absolute assurance that fraud will not occur, but rather should provide the organization’s owners, management and board members with a road map of where opportunities exist as well as practical recommendations to address each area.
In many cases unauthorized or fraudulent transactions and activity can be prevented through preventive measures, such as segregation of duties. Because preventive measures won’t prevent every type of scheme or scenario from occurring, and because limited resources often restrict full implementation of preventive controls, detection measures are also needed to identify potentially unauthorized or fraudulent transactions and activity as early as possible.
Preventive and detection measures within an organization only account for two of the three corners of a triangle used to minimize the risk of employee theft or fraud. The third and final corner of the triangle is adequate insurance coverage for the organization. All too often an employee in a position of trust circumvents both preventive and detection measure, and diverts large sums of money from an organization. The suspect almost always depletes the stolen funds, leaving little means of financial recovery for the organization. Claims made against employee crime or dishonesty insurance policies accounts for the majority of financial recovery in these cases, but only if an organization maintains adequate coverage.
With over twenty years of experience in selecting, implementing, documenting, and evaluating internal control systems in a wide variety and sizes of organizations, we can pro-actively assist your organization by objectively reviewing your current systems of internal controls, financial policies and accounting procedures. Our experience includes closely held businesses and not-for-profit organizations, with a major emphasis on small to mid-size healthcare practices.
Contact us today for a free consultation:
860-659-6550
