Understand the concept of internal controls.
The topic of internal control has long been a significant issue for businesses. Management may view internal control as a set of forms, checklists, and templates required by auditors, but it encompasses much more. Since the passage of the Sarbanes-Oxley Act (SOX), internal control—especially over financial reporting—has become a major focus for all organizations, regardless of their status as public, private, not-for-profit, sole proprietorship, partnership, or corporation. Managers must understand and establish sound, effective, and proper controls for operations, compliance, and financial processes within the organization. Effective internal control can truly provide substantial organizational value.
Internal controls are the mechanisms, rules, and procedures implemented by a company to ensure the integrity of financial and accounting information; promote accountability; and prevent fraud. These controls direct, monitor, and measure the organization’s resources, including operational and compliance activities. They play a crucial role in preventing and detecting fraud, as well as protecting the organization’s resources.
Internal control is influenced by an organization’s structure, workflows, authority lines, personnel, and information systems, and is designed to help the organization achieve specific goals or objectives. For instance, a small organization with limited resources may not be able to segregate duties as rigorously as a larger organization. However, this does not excuse small organizations from acknowledging the importance of that control; they must find alternative ways to mitigate potential issues. Ultimately, internal control is part of an organization’s overall responsibility and required due diligence to ensure its operations are effective. Management is the “keeper” and “inventor” of internal controls and must take ownership.
Lynn Fountain has over 45 years of experience spanning public accounting, corporate accounting and consulting. 24 years of her experience has been working in the areas of internal and external auditing. She is a subject matter expert in multiple fields including internal audit, ethics, fraud evaluations, Sarbanes-Oxley, enterprise risk management, governance, financial management and compliance. Ms. Fountain has held two Chief Audit Executive positions for international companies. In 2011, as the Chief Audit Executive for an international construction/ engineering firm, she was involved in the active investigation of a joint venture fraud. The investigation included work with the FBI and ultimately led to indictment of the perpetrators and recovery of $13M. Ms. Fountain is currently engaged in her own training and consulting business and is a regular trainer for the AICPA. Ms. Fountain is the author of three separate technical books. “Raise the Red Flag – The Internal Auditors Guide to Fraud Evaluations” was published by the Institute of Internal Auditors Research Foundation. -“Leading The Internal Audit Function” and -“Ethics and The Internal Auditor Political Dilemma” were published by Taylor & Francis In addition Ms. Fountain was a contributing author to the certification program exam for the National Association of Accountants. She also has certificate programs on various on-line platforms. Ms. Fountain has performed as an adjunct instructor for the School of Business for Grantham University and developed the first internal audit curriculum for the School of Business at the University of Kansas. Ms. Fountain obtained her BSBA from Pittsburg State University and her MBA from Washburn University in Kansas. She has her CGMA, CRMA credentials and CPA certificate (non-active).
