Ten things that should trigger an internal controls review

When’s the last time your company did an internal controls review? Unfortunately, some companies wait until an audit detects a material weakness or significant deficiency in its internal controls before taking action. By then it’s too late. Here are ten strong indicators the status quo of your internal controls is no longer adequate.

Overly complex spreadsheets. Spreadsheets are inherently risky in that it’s easy for accidental changes to occur. The more complex they are the bigger the risk becomes. At a minimum, it’s a good idea to evaluate these annually or even hire an outside specialist to test their accuracy.

Change in business environment due to growth or expansion. Whether a company is in a period of high growth or expanding through acquisitions and/or mergers, its important to keep a handle on internal controls.

Unhappy auditors. If your auditors are not satisfied with your current process or are asking more or different questions, they may see something you don’t. It’s time to take a closer look at your internal controls.

Pressure from management to speed up the process. The faster you do things the less time for review. Make sure your internal controls are appropriate for the pace.

ERP system or tax software implementation. A new system and process means the entire control environment has been changed. Time for a reevaluation.

Staff changes. People are a key component of the internal controls process. Has the department experienced turnover? It there a change in skill sets or structure? Has the workload increased and people are feeling overworked? It’s a good idea to do an annual review and evaluate the impact of these factors on the overall process.

Pressure to add value within the overall organization. If your tax department spends most of its time doing the necessary number crunching it can’t effectively perform value-added work. A strategic tax department requires the right resources. From an internal controls perspective, analyze how those resources are used.

Separate compliance and tax provision processes.