Accounting controls are a required element in the generally accepted accounting principles (GAAP) that every company should utilize in regards to bookkeeping and accounting procedures. In addition to mitigating the likelihood of internal fraud, they also ensure accurate reporting and give credibility to the financial statements a company publishes. Here is a quick look at the top three controls every company should incorporate into their accounting practices, and how it will provide peace of mind and ensure long-term viability.
The accounting software a company uses is composed of several different sections, and each one should be password protected to prevent unauthorized access. In addition to keeping confidential information protected, it also allows a company to track user access and identify potential threats of fraud before it leads to financial loss. Most accounting software packages include a basic amount of controls, but an accounting professional will make recommendations on other practices that will boost overall security.
Any employee within an organization that is permitted to spend money on company expenses should have a pre-set spending limit, which allows them to make purchases up to a pre-determined amount. Any payments over that amount should require management approval to help ward off wasteful spending and reduce the chances of internal embezzlement. Not only does this help keep expenses at a more manageable level, but ensures that transactions will not be questioned at a later date.
Standardized Forms and Documentation
Most companies hire an outside firm to conduct an audit of their financial statements at the end of each fiscal year. An external review of financial records helps to identify issues and the presence of fraud, and in some cases, it may help a company comply with federal accounting requirements. Utilizing standard document formats will help to streamline the auditing process as it simplifies the process of reviewing records and will make it easier to identify any discrepancies that may exist.
A lack of accounting controls may expose a company to a vast array of threats. David Johnson Cane Bay has helped companies large and small create accounting controls that streamline work processes and prevent fraudulent activity. Contact him today to learn more about the benefits of utilizing GAAP accounting controls and take the first step in mitigating financial liability.