What Level of Internal Controls Does Your Organization Need If You Don’t Have an Audit?

By Bob Swetz
Controller Consultant | Tier One Services, LLC

I get the feeling that most organizations think that maintaining proper internal controls and accounting procedures only serve to please the auditors. That attitude couldn’t be further from the truth.
Proper internal controls and accounting procedures are necessary in any organization to protect the organization, its assets, its leaders and employees.

According to the PCAOB AU Section 319…
Internal control is a process—effected by an entity’s board of directors, management, and other personnel—designed to provide reasonable assurance regarding the achievement of objectives in the following categories: (a) reliability of financial reporting, (b) effectiveness and efficiency of operations, and (c) compliance with applicable laws and regulations.

Note that nothing in that definition states that controls are for the benefit of the auditor.

A Quick Example…

Proper internal controls over the cash disbursements function are intended to prevent fraudulent payments. If the controls and procedures are followed properly they will protect the organization from theft and the employee from being accused of theft. It works both ways.

A Final Thought…

Adequate internal controls are important for every organization, not just the ones that have someone looking over their shoulder.

If you have questions or want to dig deeper, feel free to schedule a 15-minute troubleshooting session with me at http://bit.ly/Scheduling_Troubleshooting or connect with me on Facebook at https://www.facebook.com/bobswetzonline.