The CPA Solution

Internal Controls

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) defines internal controls as the following:

Internal control is a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

• Effectiveness and efficiency of operations
• Reliability of financial reporting
• Compliance with applicable laws and regulations

A successful internal control environment should allow an organization to achieve consistent, timely and useful information. The design, implementation and monitoring of the internal control system is crucial to the overall success of the organization.

An internal control system should be a process and not just a set of procedures or manuals that create a solid environment. Documentation is important and essential, but the real influences are the organizations people and how they impact the control environment. Any well-planned, thought out system must still be tested and updated for an ever changing business operating environment.

Internal control processes require implementation or review any of the following occur:

• Start-ups
• New software implementation
• Expanded business offerings
• New locations
• Changes in the regulatory requirements
• Improved financial reporting
• Improved operational efficiency

No two organizations are exactly alike when it comes to how their particular internal control process is structured or designed. At the end of the day, however, it is the functionality of the control process that weathers the test of time.

Because each organization is different, we adjust our approach to fit the unique needs of our clients.  Designing an internal control process in no small undertaking. Process control systems have to encourage discipline and structure while allowing an organization and its people to remain productive.