Best Practices: Internal Controls

Walnut Ridge Strategic Management Co. just completed an internal controls audit. Lou Colella and his advisor, Chris Cutrara of Plante Moran provided an in-depth look at their audit experience, including how they identified resources, implementation, and the end results.The biggest issues identified in this case study included: lack of cash controls, accountability for financial reporting, documentation on investment policy, and lack of committees and communication on trusts.

Key takeaways include:

• Imbed behavior in the culture of the FO and throughout the organization to ask questions (e.g., what is this $1500 payment for?)
• Audits detect fraud, and may prevent and be a deterrent, but you need to further protect through:
  1. internal controls and inability to override
  2. management review and oversight, tone at the top
• Use your external advisors to enhance segregation of duties, especially when you have a small staff
• Be thoughtful in the planning process when scoping the engagement – the FO should be clear about what the deliverables will be and the goals for the assessment
• Key is follow through – management needs to take action