Australian businesses across all sectors can benefit from bulletproof investing and strategic financial management. Internal controls are an important part of finance management, as these accounting and auditing processes ensure compliance and integrity. At Brown Auditing Services, we specialise in internal controls assessments, and we can help you with practical tips for implementing effective internal control systems.
Understanding Internal Controls
Let’s start by defining internal controls. They are systems, records and processes that organisations use to maintain integrity with financial reporting, prevent fraud and comply with all applicable laws and regulations. Internal controls also help businesses achieve their organisational objectives with improved decision-making and compliance.
There are four key pillars of internal controls for strategic financial management:
- Activity and process level risk
- Control design and implementation
- Control operations and monitoring
- Control efficacy and evaluation
When implementing internal controls, it’s important to remember that they need to be reviewed and updated over time to ensure the best business finance management. This is true for any business, whether it be a sporting club, aged care facility, non-profit or private company.
Examples of Internal Controls in Finance Management
There are many different types of internal controls that work together to support successful financial management strategies. The control environment is one of the most important elements, as this determines how organisational processes are managed. Operational policies and contracts are key examples of internal controls that reflect the organisation’s operating style and management philosophy. Such policies and agreements outline how authority and responsibility are assigned and what values and competency levels are expected of employees within the organisation.
Risk assessments are another major component of internal controls in business finance departments. Internal risks must be identified and managed accordingly, whether that be through regular meetings, reviews and/or assessments. Then there are control activities, which are policies and procedures used to manage risks across different operations. This includes authorisations, verifications, approvals, reconciliations and purchasing limits. Segregation of duties and operating performance reviews may also increase organisational security against financial damage and fraud.
Benefits of Internal Controls
A dedicated audit and assurance team can help you make the most of internal controls in financial management strategies. There are many benefits of internal controls, from efficient risk management to better operational processes and compliance. When these controls are effectively monitored and updated as required, organisations can stay at the forefront of the latest industry trends and technical resources to safeguard their operations both internally and externally.
Businesses both big and small can benefit from more reliable financial reporting and communication, made possible through internal controls. An internal controls assessment is a great place to start, as it offers insight into existing safeguards and where business security and compliance can be strengthened.