Without a solid internal control system to help deter and prevent fraud, your business is taking a grave risk. According to the Association of Certified Fraud Examiners’ 2024 Report to the Nations on Occupational Fraud and Abuse:
- It is estimated that companies lose approximately 5 percent of revenues to fraud annually.
- The median length of a fraud scheme, from the time it began to the time it is detected, is 12-months.
- The median loss per case is $145,000.
- Anti-fraud controls have a significant impact on the amount of loss.
- Frauds involving multiple people (collusion) involve much larger losses than those committed by single individuals.
- The longer a fraudster has worked for an organization, the more costly the fraud.
- The presence of anti-fraud controls is associated with reduced fraud losses and shorter fraud duration.
Janicek Valuation & Forensic Services, PLLC’s fraud investigation team assists businesses, attorneys, insurance companies and others by conducting detailed investigations of suspected fraud and providing fraud prevention services. Our team members consist of Certified Forensic Accountants (CRFAC), CPAs Certified in Financial Forensics (CFF), and Certified Fraud Examiners (CFE). Services include:
- Investigating financial statement fraud
- Investigating employee theft
- Investigating check kiting
- Tracing money or assets
- Determining the reasonableness of insurance claims
Internal Accounting Controls Analysis
With an internal accounting controls analysis, we can help identify weaknesses in your business processes and recommend policies and procedures to help lower your fraud risk, and help detect it should it occur. Businesses of all types and sizes are susceptible to fraud, but small businesses are often the easiest targets. A Certified Fraud Examiner (CFE) conducting an Internal Accounting Controls Analysis on an organization typically follows a systematic procedure to evaluate the effectiveness and efficiency of the organization’s accounting controls. The key steps in this procedure include:
- Planning and Preliminary Assessment:
- Understand the organization’s operations, environment, and internal control system.
- Identify key areas of financial reporting, operations, and compliance.
- Define the scope and objectives of the analysis.
- Documentation Review:
- Review existing documentation related to internal controls, such as policies, procedures, and organizational charts.
- Examine past audit reports, financial statements, and any previous internal control assessments.
- Risk Assessment:
- Identify and assess risks that could affect the accuracy and integrity of financial reporting.
- Evaluate the potential for fraud and areas where internal controls may be weak or lacking.
- Control Environment Evaluation:
- Assess the overall control environment, including the organization’s culture, governance structure, and management’s commitment to internal controls.
- Evaluate the competence and integrity of personnel responsible for financial reporting.
- Testing Internal Controls:
- Select a sample of transactions and processes to test the effectiveness of internal controls.
- Perform walkthroughs and detailed testing of control activities, such as reconciliations, approvals, and segregation of duties.
- Analysis of Control Activities:
- Examine the design and operation of control activities, ensuring they adequately address identified risks.
- Evaluate whether controls are being implemented consistently and effectively.
- Information and Communication Assessment:
- Assess the adequacy of information systems and communication channels used for financial reporting and internal control monitoring.
- Evaluate how information flows within the organization and to external stakeholders.
- Monitoring and Reporting:
- Assess the organization’s processes for monitoring internal controls, including internal audits and management reviews.
- Identify any deficiencies or areas for improvement in the control system.
- Reporting Findings:
- Prepare a detailed report summarizing the findings, including identified weaknesses and recommendations for improvements.
- Communicate the results to management and, if necessary, the board of directors or audit committee.
- Follow-Up:
- Develop a follow-up plan to ensure that recommended improvements are implemented.
- Monitor the progress of corrective actions and reassess the controls periodically.
This procedure helps ensure that the organization’s financial reporting is accurate, reliable, and free from material misstatement or fraud, thereby safeguarding assets and enhancing operational efficiency.