Unlocking the Potential of Software in Strengthening Your Internal Control System

 Internal controls are a crucial component of every organization since they assist the correctness, dependability, and integrity of the financial information the firm produces, as well as compliance with all applicable laws and regulations. So, the importance of internal control system is humongous. 

One prevalent misconception is that the primary function of the internal control system is to formalize and document controls through rules and procedures followed by routine testing. However, the ability of management and staff members within your organization to act and communicate effectively is one of an internal control system's most crucial elements. User-friendly GRC software should strengthen organizations' information and communications linked to internal controls because all other internal control components rely on pertinent, high-quality data supported by the Information and Communication component. 


Separate Accounting Tasks 


Mostly, small businesses rely on a single employee or a bookkeeper to oversee all facets of the accounting process, including authorization, execution, custody, and posting of transactions. In a perfect world, the processing of cash collections and payments would be separated, with various parties handling the approval of invoices, cheque preparation, cheque writing, and bank account reconciliation. One person taking the deposits, posting payments in the system, and handling received cash or cheques increase the danger of fraud. Different people should handle these processes separately. If your company can't do this, it's wise to switch out the people doing the above duties occasionally. Internal audit control system helps a lot in financial matters.

 

Control that has access to financial systems 


The most popular accounting software firms’ use allows users to change and remove earlier transactions, which might make it simple to cover up the theft. This boosts the service of the internal control system in auditing. Business owners should keep ADMIN access to the company's accounting system and think about limiting user access to only those sections required for their roles. This will lessen the likelihood of someone making fictitious posts and trying to hide their traces. Reviewing voided and deleted transactions will reveal any edits or deletions and can help identify process abnormalities. 


Increased scrutiny 


Internal check systems in auditing that are not subject to monitoring are inadequate. Bank statements, cheques or payment registers, and bank reconciliations should all be meticulously reviewed regularly by you or a reliable source. Examine payroll statements for fictitious employees and unauthorized salary hikes, overtime requests, or expenditure claims. Ensure the employee understands the need to maintain supporting documentation and that you should occasionally check some transactions and accompanying documentation for legitimacy and accuracy.

 

Submit financial statements for external review. 


Business owners might use their CPA to periodically analyze the financial statements to support bookkeepers and other in-house accounting operations. A person is less inclined to commit fraud if they know that their work will eventually be scrutinized. An external accountant may be beneficial in spotting errors and discrepancies in the financial records and assisting business owners in better understanding the processes of their financial data. 

The most crucial thing for business owners to do is to adhere to policies and procedures that prioritize reviewing financial reports and comprehending trends and changes in the company's financial data. Understanding monthly, quarterly, and annual variations and differences between budget and actuals should be a priority. 


The points mentioned above meticulously describe the potential of software in strengthening your internal control system. This is very keen that software can radically change the system. Laser GRC will assist you in improving your organization's internal Financial Control System. 

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