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Internal Audit – Finance & Control

August 14th, 2008 Comments off

In my last posting about embracing the Internal Audit process, I spoke to the value this exercise can provide to any current or new Finance leader. For the audit that we had gone through after the close of purchase for the final minority share of our business, we performed a comprehensive review on six key areas of our operations. I outlined these areas in my last post, and today, will go into a little more detail on the area of Finance & Control. It’s still best to keep in mind that this was an audit that spanned approximately 8-weeks so even a more specific overview is still a summary at best and the level of underlying detail is much greater than what is represented here.

As far as our review of the Finance area, the goal was to assess the adequacy of our primary Finance & Accounting processes, Credit management, and our application of Group Accounting principles. To break this review down a little further, we were going to run through some of the following steps:
1. An analytic review of our financial statements along with our external auditor reports.
2. A review of our systems and processes that supported our financial reporting.
3. Reviews of our delegations of authority.
4. Our compliance with Group Accounting principles.
5. Invoicing, Credit, and Cash management.
6. Assess the valuations of our balance sheet reserves.
7. Reviews of our fixed assets and associated valuations.
8. Reviews of employee expense reports.

This was certainly not a simple review and necessitated extensive time to pulling documents and reviewing our processes. Further, each one of these process needed to be assessed a risk-weighting that determined what degree of risk it posed to achieving our results and generating accurate reporting. There were three distinct levels of risk depending on what “Findings” were associated with each area. A “Finding” could either be quantified through it’s potential impact to results or qualified through a breach of corporate policies or guidelines, or the ability to impact the reputation of our corporate parent.

Again, since we had already been operating under the umbrella of our corporate parent for a number of years, we had already embraced their guidelines and reported our results according to Group Accounting principles. Therefore, our preparation level was already very good with respect to this audit. Any anxiety levels aside, it was a process that should be embraced by any Finance leader that is new to the organization and needs to uncover potential areas of risk.

Thanks for reading . . . .