Accounting is a core function in every business. Businesses need accountants to track revenue and expenses, create budgets, evaluate financial performance and financial projections and maintain compliance. Experienced accountants provide up-to-date financial information to support decision-making.
Unfortunately, and far too often, accounting is also connected with scandal or fraud. The preparation of fraudulent financial documents, inflated earnings, concealed bad debt or other expenses, manipulated payroll, misreported tax liabilities and false insurance claims or banking applications. The wrongdoers were able to commit fraud because the victim organization lacked strong internal accounting controls. Without strong internal control measures in place, the wrongdoers can manipulate documents and data, misrepresent the company’s performance, and commit outright fraud.
According to the International Federation of Accountants (IFAC), the COVID-19 pandemic has heightened the risk of fraud and illicit financial reporting because of the shift to remote working; when employees are separated from the main office, internal controls can be easier to bypass.
No organization is immune to such scandals. What controls can you put in place to minimize the potential loss and embarrassment?
Detective internal accounting controls include: inventory counts and checks; internal and external audits, surprise cash counts, and reconciliations.
Preventative internal accounting controls include: segregation of duties; controlled access to the accounting and financial reporting system; double-entry accounting; limiting management involvement in financial statement preparation, expense verification; and limiting physical access to cash, equipment, inventory, and other assets.
Corrective internal accounting controls include: physical audits of assets and inventory; adjustments or rectification entries in the accounting system; and ledger verification.
All organizations need solid internal controls to assure the reliability of the financial reporting, processes, and compliance with various laws and regulations. Outsourcing your accounting functions to an organization such as B2 Management & Consulting (B2) can strengthen the segregation of duties, whether it be through our handling of the day-to-day transactions or we can act as an overlay to your internal accounting department. B2 can review underlying financial data, payroll registers, bank reconciliations and other key areas that are susceptible to error -intentional or unintentional. B2 can also provide consulting services to help you establish sound internal control procedures in your organization.
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For more information on accounting & bookkeeping services, please contact Brenda Barnes at email@example.com.