Keeping your company running smoothly includes making sure your accounting practices are in sound working order. Some of the most expensive mistakes a company can make include not conducting routine internal control.
Internal control can find accounting mistakes before they cost you a fortune. Setting up a constant internal control program can be useful at audit time and on the off-chance you need to produce accounting records for legal action. Internal control can also detect potential fraud or solve issues that may be caused by not-so-honest employees.

Action Steps
The best contacts and resources to help you get it done

Sarbanes-Oxley

The Sarbanes-Oxley Act of 2002 was created to oversee the accounting process of public companies and make sure the information is as uniform as possible.

I recommend: Use the guide to the Sarbanes Oxley Act online to get a better understanding of how it affects your accounting and internal control.

Forensic accounting

Auditors use forensic accounting services such as tax analysis, royalty audits, record analysis and courtroom testimony to help with internal control. Forensic accounting is often used to prepare for court cases, but it can also be used to make sure all your records are being kept properly or to find any fraud that may be taking place.

I recommend: Pannell Kerr Forster of Texas explains forensic accounting and the services it offers.

Public Company Accounting Oversight Board

The Public Company Accounting Oversight Board (PCAOB)was formed to watch over public company accounting and auditing. The board was designed to provide assistance in complying with the Sarbanes-Oxley Act.

I recommend: Visit PCAOB to find out more about the nonprofit organization and how it can help a company with internal control.

Controls tests

Control tests are used to detect and prevent financial misstatements. They are designed around a company's operations as part of the internal control process.

I recommend: The New York State Society of CPAs defines control tests as they relate to companies' accounting practices.

Specific and general control

Specific control procedures refer to management of accounting as it relates to a specific business task such as receipts or withdraws. General control is an environmental control that refers to the overall internal accounting control.

I recommend: The glossary at the Activity Based Risk Evaluation Model of Auditing explains the difference between general and specific internal control.

Spot checks

Spot checks are an important part of internal-control accounting practices. Keeping all your employees honest and trustworthy should include unannounced spot checks to determine any errors or questionable activity.

I recommend: The Microfinance Gateway explains how spot checks are valuable. Look under internal controls.

Internal control plays a key role in helping business owners protect their organizational structure and resources. Internal control allows businesses to monitor work flows and other business processes, manage various business procedures and measure the effectiveness of business processes.

Implementing an internal control system is important to the effectiveness and efficiency of a company’s financial and business policies. Internal control systems are designed to eliminate or decrease business risks associated with errors and inconsistencies. Consider the following benefits of an internal control system:

1. Help business owners prevent fraud and inefficient business practices through internal control systems.

2. Ensure compliance and consistency across different business policies and processes.

3. Help business owners easily measure organizational performance.

Action Steps
The best contacts and resources to help you get it done

Purchase internal control software

Once you have created an internal control list outlining all of your company's processes and policies, you can try purchasing internal control software to assist you in creating professionally designed flowcharts to outline business processes and work flows. Internal control software also helps you to see the big picture and easily identify areas of concern and missing policies.

I recommend: SmartDraw offers graphics software designed to help businesses create internal control flowcharts and process diagrams in a professional format. Enablon is a leading internal control provider that sells software to help companies reduce business risk and comply with Sarbanes-Oxley and other regulatory policies.

Find internal control experts

Internal control systems can be used to manage a range of accounting procedures, as well as policies in other business units. If you are having trouble implementing effective internal controls, seek advice from a professional who is experienced in successfully implementing internal control systems.

I recommend: Plante Moran provides business owners with internal control information as well as advice on how to improve current internal controls and implement an effective internal control system. The PKF Texas auditors provide advisory services designed to help businesses evaluate current internal control systems as well as create new internal controls.

Check an internal control directory for service providers

Internal control systems can be implemented for every process or policy in your business. Think about your organizational structure and determine which internal controls are necessary to help you mitigate risk and operate effectively. Once you have reviewed your internal processes, try checking an internal control directory like the one on Business.com for internal control provider resources.

I recommend: Protiviti helps businesses implement internal control systems to effectively mitigate risk and inconsistency in business processes. Softrax is an internal control provider listed on Business.com that offers a free checklist that business owners can use to evaluate current internal controls.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Implementing an effective internal control system can be obstructed by several factors; including staff size, employee commitment and budgetary issues. Internal control is not an overnight quick fix, address the issues you can manage and set a plan to address other problems when it is feasible for you to do so.

Internal control systems and processes have always been critical to business. They're your checks and balances, helping you manage your resources and protect yourself against fraud and loss. Since the passage of the Sarbanes-Oxley Act of 2002, however, internal control activities have become even more important in assuring compliance with financial reporting regulations.

Whether you are looking for internal control information for your own accounting staff or are seeking to hire an internal control provider, there's a wealth of advice available. You get what you pay for here. Programs and resources that offer internal control advice and ratings may require a substantial investment, but they can pay for themselves in helping you avoid costly audit errors and prevent fraud.

1. Look to professional internal control organizations for advice on implementing procedures.

2. Rely on the internal control ratings standards developed by COSO.

3. Use industry rankings for internal control advice and ratings when seeking to hire an internal control provider.

Action Steps
The best contacts and resources to help you get it done

Find internal control advice and guidance from leaders in the field

In order to comply with the complex regulations that pertain to maintaining your company's internal control systems, you and your staff need access to the best possible internal control information. For internal control and audit advice, look to professional organizations.

I recommend: The American Institute of Certified Public Accountants (AICPA) has developed Guidance on Monitoring Internal Control Systems, a complete reference program available through the AICPA's partner, CPA2Biz. The Institute of Internal Auditors (IIA) maintains a library of guidance and reports on internal control issues. It requires a membership in the IIA to access some materials.

Get specific internal control advice and ratings based on COSO principles

COSO, the Committee of Sponsoring Organizations of the Treadway Commission, developed the key principles used in assigning ratings to assets in internal control applications. Look for internal control advice and ratings resources that help you understand and apply the COSO model.

I recommend: Read an article summarizing the COSO model at COSO.org. The Internal Control Institute offers a number of resources, including Quantitative Rating Based on the Use of the COSO Model, to help you evaluate your internal control list less subjectively. It also offers discounts to members for some of its programs.

Rely on industry rankings to choose an outside internal control provider

Many businesses choose to hire outside accounting firms to handle their internal control and other audit services. In order to choose the best firm for your needs, turn to internal control advice and ratings found in annual industry rankings of accounting firms.

I recommend: Accounting Today's Top 100 Firms list is like an internal control directory, with listings of accounting firms ranked regionally. It requires free registration to access the list. Public Accounting Report, from CCH, publishes an annual Top 100 list available to subscribers. Read the top 10 list and get information on subscribing or purchasing the report.