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Maintaining Internal Controls


How can you be certain that your company is protected via your own internal controls? Perhaps more importantly, are you aware whether your company even has internal controls?

Internal controls are categorized as "before" and "after" (or in industry terms, "preventive" and "detective") controls.

Preventive Controls
Preventive controls 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 in nature, these controls restrict access to assets like equipment, inventories, securities and cash.

Detective Controls
Whereas preventive controls are designed to discourage errors and irregularities, detective controls are designed to find them after they have occurred. Examples include:

  • Performance reviews
  • Reconciliations
  • Physical inventories
  • Audits

Consider putting the following practices in place at your company right now:

  1. Locking your office when you leave, even for a short time.
  2. Reviewing monthly comptroller's statements.
  3. Requiring authorizations.
  4. 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.

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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