FAQ on Internal Controls

How can they help my business?

An effective system of internal controls will likely lead to increased accuracy of financial information which will give owners and management better decision-making ability. They can also help provide peace of mind that your business is operating as it should with a decreased probability for accidental errors or intentional misstatements.

Should small companies have internal controls?

Yes. All companies should have internal controls as they are important regardless of size. In fact, controls may be more important for a small business because one accounting error or misstatement may have a greater impact than in a large business. Smaller staff can make smaller companies more susceptible to errors and fraud.

Can controls be implemented at a reasonable cost?

Yes. The simplest controls are easy steps that can be done without a significant investment of time or money. See the list below for some common, but effective controls that all businesses should have in place.

What can effective controls accomplish?

Effective controls can lead to more accurate information. They also decrease the likelihood of significant errors, misstatements, and even intentional malicious acts by employees.

What steps can business owners take to improve internal controls?

1. Do not share passwords and change them regularly.

2. Reconcile Information: All bank accounts and credit cards should be reconciled on a regular basis. If you want to take the next step, have someone in management or an owner review the reconciliation.

3. Segregate Duties: Split up steps in the cash receipts and payment processes among different employees. It only takes two people to have a simple segregation of duties. For example, if someone approves invoices, have someone else sign the check.

4. Have owner(s) be present and actively involved. You do not need to micromanage, but just being aware of the processes in your business will go a long way towards better financial reporting and deterring intentional misstatements.

5. Take an internal control survey to evaluate the current status of your control environment. If interested in such a survey, please contact TEG and we can provide you with a copy.

How can Trout CPA help?

• Assist in establishing controls. If your business lacks internal controls, you can see from the above questions and answers how important they can be for businesses of all sizes. If you are not sure where to start or would like professional advice, TEG can assist in establishing internal controls that will fit your company.

• Review existing controls. If you have internal controls in place, your business has already taken positive steps and established a controlled environment. There is always room for improvement and TEG can assist in reviewing and testing controls that are in place and make suggestions to change or enhance those controls.

• Provide support if controls are circumvented and result in an error, misstatement, or theft. Hopefully, as a business owner or manager, you never have to deal with a breakdown in the internal control environment that leads to negative consequences. If you are in a situation and need to know where things went wrong or how much was misreported, TEG can help. Our forensic team will not only help uncover the error or theft, but we will also work with you to improve your processes and help prevent future problems.