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Five questions every manager should ask about internal controls
You do not need to be an auditor to judge whether your controls work. These five questions will tell you quickly where the gaps are.
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In this short explainer we walk through five questions that give any manager a fast, honest read on the state of their internal controls.
The five questions
- Can one person complete a transaction from start to finish? If yes, you have a segregation of duties gap, and the biggest fraud exposure in the business.
- Do approvals happen before or after the money moves? Approvals that happen after the event are records, not controls.
- When was the last time a reconciliation found something? A reconciliation that never finds anything is probably not being performed properly.
- Who can change master data? Supplier bank details, customer credit limits and payroll records are where most damage happens.
- What would tell you something has gone wrong this week? If the honest answer is "the year-end audit", you need detective controls.
What to do with the answers
Write them down, process by process. Where the answer is uncomfortable, that is your remediation list. Most gaps can be closed with a change in who does what, not with new systems.
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