Take charge of your financial close controls and compliance.
According to EY, one of the key characteristics that separate the “high performers” in the financial close process from the rest of the crowd is that they have a documented and detailed understanding of significant processes. Internal controls are tools that help finance managers — and the whole organization — be efficient while avoiding serious problems, such as violation of laws or fraud.
By doing so, they can identify the key risks in the financial close process and can have a very well-defined and functioning internal control process. Ensuring that your internal controls are well-defined will result in increased reliability of financial reporting and compliance with applicable laws, regulations, internal policies, and efficiency of operations.
What Are Risk-Based Financial Controls?
Risk-based financial controls and compliance are critical parts of effective risk management. The most common internal control framework for this is, COSO*. Broken down into five different internal control elements that fall within three objectives and four entities, this framework can provide peace of mind for corporate boards, stakeholders, and regulators.
5 Essential Elements of Internal Control Over Financial Reporting
- Control Environment: How are you creating awareness of and visibility to potential risks in the financial close such as fraud, manual errors, and shared spreadsheets?
- Risk Assessment: It’s important to identify and analyze relevant risks and cross-reference them with your key objectives to determine any barriers to success.
- Information and Communication: How well are finance department personnel informed of ongoing control activities and their purpose? Are they updated when changes are implemented?
- Monitoring: IT systems that are purpose-built for monitoring the financial close process allow you to more effectively test and adjust control activities, and to regularly address and remove bottlenecks.
- Control Activities: Clearly defined processes and activities at corporate, reporting unit and transaction levels are designed to reduce your identified risks
Identify Common Risks in Your Numbers
The whole point of implementing control measures is to mitigate any potential risks you’ve identified within your numbers. Examples of control activities in the financial area include:
- Rights & Obligations
There are a number of known financial reporting risks that you should be aware of and work to avoid. In this eBook, we’ll describe the most important steps you must take to implement the necessary control activities, streamline processes, and quickly identify risks within the finance department, so that you can increase control, close faster and truly trust your numbers.