By Sandy LeDuc
LeDuc and Sikowitz
As any manager will tell you, full employment and the need to remain competitive has forced us to make changes in the way we do almost everything in our businesses. Jobs have been combined and reconfigured while technology has been enthusiastically embraced in an attempt to do more with less.
There's no question that technology has allowed us to overcome some of the challenges of being understaffed. It has also given us command over efficiently processing voluminous transactions, improved communications and reduction of the number of steps and people involved in the transaction processing cycles.
The recent proliferation of fraud detection professionals points out at least one of the negative effects of technology on business today. Fraud is a growing business.
The speed of technological evolution has us responding to change without thinking through the effects of changes on internal controls. Frequently, the implementation of new technology has been accomplished using employees or consultants who have no long-standing familiarity with the original systems or the interactions of functions and departments. The promise of the paperless office and data being available "on command" has resulted in a disregard for the maintenance of documentation.
Internal controls are a series of procedures and methods designed to provide checks and balances to safeguard a business's assets, ensure the accuracy and reliability of accounting records, promote operational economy and efficiency, and encourage adherence to managerial policies. The system extends beyond those matters that relate directly to the functions of accounting and finance and takes into consideration the environment in which the business operates. The system is designed without regard to the specific people in place when designed and is not suspended to reflect our trust in specific people.
Controls are of two types: preventative controls designed to discourage errors or irregularities from occurring or detective controls designed to find errors or irregularities after they have occurred.
Each time we simplify a process, replace or update a system or change a job description we run the risk of weakening the underlying internal controls and opening a door to error or fraud.
While change is inevitable, a good manager will include consideration of internal controls in any changes to personnel assignments as well as technology selection and implementation.
Winter 2001 - Volume 11, Number 1