22 Nov Internal Control Overview
Internal Control Overview
QuickBooks® Accounting Software has become one of the most common packages used by small businesses. As Intuit continues its strategy of “Right for My Business” by adding functions, acquiring other products and expanding the market base for its products internal controls become an important consideration for accounting professionals. The software is very easy to use and very forgiving when mistakes are made; however, attention to the procedures used by the small business to protect the integrity of historical data and safeguard the assets of the company deserves additional attention. That is the purpose of the information contained here.
Entrepreneurs are notable risk takers, but usually do so in a controlled way. Although no company can isolate itself from the potential risks involved in business completely, there are numerous ways to minimize that risk, or at least make conscious decisions as to which risks will be taken. Addressing internal control issues is a logical first step to minimize the risk.
For some perspective, visit to the Certified Fraud Examiners website for their fraud statistics at www.cfenet.com/media/statistics.asp. One of the most interesting is that only 7% of the occupational fraud perpetrators were known to have prior fraud related convictions. According to a CAMICO IMPACT No 54 article “Defalcations Continue to Plague Small Businesses” and related “Three Perspectives” personal and management issues, combined with opportunity due to lack of internal controls, creates a situation some employees may be unable to resist.
For additional resources, visit the following:
Fraud Prevention Check Up (www.cfenet.com/services/frdprevcheckup.asp) This test provides the ability to score the organization on a wide variety of questions. It should be noted, however, that the first item on page one under before you take the check up is “Let your organization's general counsel or outside legal counsel know you plan to take the test. They may want to have you use the test under their direction, to protect your organization's legal rights.” Then the second item is “Don't take the test if you plan to ignore the results. If it shows you have poor fraud preventions processes, you need to fix them. Failing to act could cause legal problems.
2002 Report to the Nation (www.cfenet.com/pdfs/2002rttn.pdf) This is a 30+ page document that includes countless graphs and statistical information on all aspects of fraud including the type of schemes, their duration, has the victim taken action to avoid in the future, etc.
CFE loss estimate for 2002: 6% or revenue or $4,500/ee
Journal of Accountancy, March 2003, “Protect Small Business” by Joseph T Wells
QuickBooks . . . Fraud, http://www.baysidemedia.com/Quickbooks_enews/qbarticle_fraud_1102.html
Financial Fraud, http://www.napiercpa.com/newsletter/mar99/page2.html
The “F” word? Fraud! http://www.bookkeeperlist.com/fraud.shtml
Protecting vital records & bank accounts http://www.businessweek.com/smallbiz/content/jul2002/sb20020731_6474.htm