Internal Control Evaluation & Improvement
Providing clear guidance to employees regarding roles, responsibilities, and performance of job functions has always been essential for successful accomplishment of objectives. Evaluating the effectiveness of the associated internal controls has long been considered a best practice. For public companies, these practices have now been codified into law.
Section 404 of the Sarbanes-Oxley act directed the SEC to implement rules to require public companies to include in their annual reports a report of management on the company's internal control over financial reporting. The final rules adopted by the SEC require preparation of the report, an assessment by management of the effectiveness of the controls, and an attestation by the independent auditors of that assessment. Also, management must evaluate any change in the internal control structure that could materially affect control over financial reporting, including the ability to deter or detect fraudulent transactions. The commitment required of management to coordinate internal resources, external advisors, and the attest auditor is great. Accordingly, the costs of compliance are high and disproportionately impact smaller public companies.
To be successful with the internal control reporting process, the company will need to define and continuously monitor a process to methodically and consistently identify and assess processes and control activities throughout the organization. Additionally, if properly performed, development of this comprehensive documentation should provide tremendous value to the organization. Understanding the control points within a process is the basis for enhanced risk assessment activities, process redesign initiatives, and training initiatives, each of which can be a value-creating process in its own right.
Cendrowski Corporate Advisors has unparalleled experience with the design and implementation of internal control structures. This experience is why we were asked by NACVA to write the training program for their Certified Fraud Deterrence Analyst program - a program firmly rooted in the analysis of internal control structures. We can directly assess your internal control structures, or analyze your ongoing internal control reporting process to identify process inconsistencies or improvements that will help raise the quality and usability of the outputs. We firmly believe that the report on internal controls should be more than a book that is only opened once a year.