Often used as an early warning system, red flags can proactively assess the risk of re-work, financial restatements, and fraud throughout your financial process. The importance of these red flags is critical, as they foreshadow any risks prior to them negatively impacting the integrity of your financial close.
These red flags often occur throughout your financial close due to the utilization of desktop applications lacking automation, audit trails and integration, forcing increased manual interaction throughout your processes. This increases the complexity and makes it difficult for companies to have clear visibility into their financial close.
To that end, it is vitally important to have buy-in from a corporate sponsor by highlighting the possible impact that this could have on the business and acting upon it prior to this impact being realized. Remembering that prevention will always be better than cure and realizing these dangers before they can negatively impact the integrity of the process and the end numbers is critical.
Chances are the people reading this won’t be involved in a serious restatement and the likelihood and impact of these risks will vary. However, all could have serious impact on the integrity of the data which will ultimately lead to wasted resources and increased costs.
So, what are the top 10 record to report red flags that you need to be monitoring?
- High staff turnover
- Increased use of temporary resources
- Inaccurate assessments
- Management override of controls
- Extensive use of manual Journals
- Poor quality Account Reconciliations
- Conflicting or missing evidential matter
- Inadequate systems
- Disparate systems
To find out more details around these, please click on the banner below to download the Insights piece around Record to Report Red Flags.