Internal controls are put into place to safeguard a company’s assets, and the integrity of the information produced by its accounting information system. Many leave out preventive controls and what can be a time consuming and costly process of analysis and set-up in favour of waiting for an error, problem, or worse theft to show itself after the fact. We can argue that if none of those items ever does show up, we definitely saved by not wasting time on those preventive controls! The problem with that is waiting for a problem to show up can take time, and unless detective controls are strong, often an error, problem or fraud can go unchecked for weeks, months even years with the damage building with time. Once the problem is identified the cost of identification, correction and damage to the overall system can be exponentially larger than the cost of starting off on the right foot.
An example is handling of cash by a business. Most businesses that receive cash have someone set-up to receive the cash, take the deposit to the bank and record the deposit into the accounting records. The problem with this train of events is if one person is doing all three activities with no other involvement. If the same person who receives the cash is also in charge of recording it, it is much easier for that person to simply take the cash and not record it in the books or alter the books to cover the misappropriation of the cash. However, if we involve a second person in the process to prepare the entry into the accounting records and deposit slip, we remove the ability to take the cash without another staff member’s knowledge.
Ensuring you set-up your system with appropriate roles, checks and balances at the start can have you rest easy knowing your process is protected and therefore so are your assets and data!
How SG Can Help
Talk to one of our experienced professionals about our business consulting and advisory services for more tips on how to put in place internal controls to help your organization succeed. We would be happy to set-up an in-person meeting to discuss your business, accounting and taxation needs.
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