Why you Should Monitor your Internal Controls?

As an entrepreneur, we have already decided to take the good with the bad." - Fontenot & Associates Solutions

Companies of all Sizes should have a Guide to Monitoring

Monitoring the internal control system is used to locate weaknesses and improve controls.  Monitoring often includes observing employee behavior and accounting system for indicators of control problems.  Some indicators are below:

​Warning signs with regard to people:

• ​Abrupt change in lifestyle
• Close social relationships with suppliers
  
• Refusing to take a vacation
  

Warning signs from the accounting system:

• ​Missing documents or gaps in transaction numbers
• An unusual increase in customer refunds (refunds may be phony)
  
• Sudden increase in slow payments (employee may be pocketing the payments)
  

​Evaluation of controls are often performed too late.  Establish your policies and procedures to ensure a reference guide for your employees and also for management so that they understand and have additional assurance on how the financial statements are being prepared.

Source:  Corporate Financial Accounting 12E