Internal Accounting Controls

OUTSOURCED INTERNAL ACCOUNTING CONTROLS

Maximize Controls and Compliance

Implementing internal accounting controls ensure that your company complies with federal and state laws and regulations in managing financial information and sensitive data.

Segregate Accounting Duties

Small businesses usually depend on one employee or a bookkeeper to ensure the process in all aspects of the accounting process, including authorization, execution, custody, and posting of transactions. Ideally, the processing of cash receipts and payments will be separated, with segregation of duties with different people approving invoices, preparing checks, signing checks, and reconciling the bank accounts. Allowing one individual to handle cash or checks received, the deposits, and the posting of payments in the system increases the risk of fraud. Utilize an outsourced accounting firm!

Restrict Access to Financial Systems

Consider restricting user access to only areas necessary for their functions. This will help reduce the chances of an individual creating false entries and covering up their tracks. Pacioli will assist in file management and organization to ensure that access is restricted to a need to have basis.

Increase Oversight

You, or a trusted resource, should diligently review bank statements, check or payment registers, and bank reconciliations regularly. Review payroll statements for phantom employees and unapproved raises, hours, or even expenses. Pacioli keeps supporting documentation which is reviewed for validity and accuracy.

Have Financial Statements Reviewed by a Third Party

To support bookkeepers and other in-house accounting efforts, business owners should consider utilizing their CPA to periodically review the financial statements. An individual who knows that the work performed will subsequently be reviewed is more likely to be deterred from committing fraud. An outside accountant can be instrumental in identifying inaccuracies and inconsistencies in the financial records as well as helping business owners better understand the procedures of their financial data.

Require Employees to Take Vacation

In the client example mentioned earlier, the company identified the unusual checking activity while their bookkeeper was out of town for training. Embezzlement and other types of fraud require a constant paper trail cover-up in order to go undetected in accounting records. Therefore, business owners should insist that employees who perform the company’s accounting/bookkeeping duties take a vacation every year and designate a backup person to cover their responsibilities during that leave. Ideally, the vacation should be at least a week-long and occur over a month-end when the books are being closed.

We Can Help

Pacioli provides small and mid-sized businesses with the resources of a full accounting team on an outsourced basis, so our clients achieve effective segregation of accounting duties without having to hire additional full-time accounting staff. We ensure that all of our clients have preventative controls in place and provide an appropriate level of oversight and challenge for the company’s financial books and records.