According to a spokesperson from the Risk Unit of Marquette University of Milwaukee, Wisconsin, “Establishing effective internal controls can help a department operate more efficiently and effectively and provide a reasonable level of assurance that the processes and products for which it is responsible are adequately protected.”
How can you be certain that your company is protected via your own internal controls? And even more important, does your company have internal controls? It really all comes down to “before” and “after,” or in industry terms, “preventive” and “detective.”
Preventive Controls: These are proactive. They are aimed at discouraging errors and irregularities. According to Vanderbilt University, examples include:
- Segregation of Duties: Simply put, assigning duties like accounting and approvals to different teams or employees
- Approvals, Authorizations and Verifications: A supervisor’s approval (manual or electronic) provides a checks and balances system because he or she has verified and validated that the activity or transaction conforms to your established policies and procedures
- Security of Assets: Both preventive and detective, this restricts access to assets like equipment, inventories, securities and cash
Detective Controls: While preventive controls are designed to discourage errors and irregularities, detective controls are designed to find them after they have occurred. Examples include:
- Performance reviews
- Physical inventories
Actions you can put into place at your company right now include:
- Locking your office when you leave, even for a short time
- Reviewing monthly comptroller’s statements
- Requiring authorizations
- Performing reconciliations on accounts
No business owner wants to believe that the employees he or she sought, hired, trained and has confidence in, are doing anything deceitful. But sometimes, unexpected things happen, and steps need to be taken to protect your business.
If you are unsure of how to create and put into force internal controls at your company, call us. We have the background and knowledge to save your company a great deal in funds and assets.