Do Companies Have A Looser Grip On Controls Than They Think?

Compliance Controls SquareAccording to an article in the Wall Street Journal and a survey from the Institute of Internal Auditors (IIA), companies seem to have a looser grip on their internal controls than they realize.

With recent high-profile stories like Hertz and Toshiba, it is clear that organizations need to increase the use of technology to automate all processes including reconciliation and certification, embed compliance, and ensure authorization and proper sign-offs with appropriate documentation are all digitally calculated, directed, and captured.

While overall restatement figures have leveled off through the years, the problem is always that you don’t know what you don’t know.  If companies have not automated their internal controls – they simply don’t know until it is too late what their total restatement exposure is.

And many CFOs and CAEs seem to be aware of the risk, yet automation still falls lower on the priority list than it should.  Some key stats that have come out of the various recent reports:

  • Only 38% of CAEs say their organizations are using technology at an “appropriate” level or higher.
  • Audit-oversight inspections indicate 36% of company audits had internal-control deficiencies as of 2013, and this trend is on the rise.
  • 80% of companies having to restate their financials previously thought their controls were effective.

This suggests some level of disconnect between the Controllers, who are struggling with a lack of automation and extensive effort to meet deadlines and KPIs, and the CFOs who trust that the human intervention delivering the earnings reports is enough.

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