Modern organizations are finding that internal controls are no longer a manual task for the accounting team. Using accounting software to automate and manage internal controls provides safeguards against losses, thefts, and mistakes. EMK offers AccuFund software to help you accurately track finances.
About the Integrated Audit Technique
What is the “integrated audit technique?” This technique provides a broader scope on the adequacy and effectiveness of internal controls to lessen the gravity of risks. It also involves the integration of manual nonprofit internal controls with the use of technology, financial and operational auditing types to enhance and facilitate controls.
The idea is to use accounting software to make the auditing process easier and to help you maintain better oversight and control of your operational and financial budget. Technology cannot replace human oversight when it comes to internal controls, but accounting software can help you manage unusual account activity and any other signs that something is not right.
How Accounting Software Manages Financial Controls
New accounting software systems and financial technology offers some level of internal controls. The controls that are currently in place will help detect misstatements and misdirection used to mask fraud within your organization. Some of these actions can cause financial statements to be materially mistaken. Financial and accounting systems have, at their most basic level, coding built into the system that alerts you when the account reconciliation is unbalanced or when receivables and bank deposits do not match.
Technology controls are often split between general and application controls. General controls are, as the name suggests, broader and more sweeping in scope. They encompass the organization’s infrastructure and elements such as IT governance, network access, disaster recovery plans, and the like, whereas application controls are more specific to the technology in use. When you understand all the application controls built into your system and how they work, you can use them to your advantage.
Early Detection of Fraud and Internal Controls to Set in Place
What should you be aware of as you review both general and application controls? As a firm that provides accounting software services, we’ve seen some instances where an early detection of problems could have prevented many headaches in the long run.
Some items to watch as part of your general financial controls:
- Accounts payable
- Inventory
- Payroll
- General ledger entries
- Reporting
- “Slush funds” or cash boxes (manual control needed rather than technology)
“Some common areas of concern include duplicate entries, unauthorized access, and plain old common mistakes. Something to keep in mind is that one or two mistakes are easy to understand, but multiple mistakes made by the same person should be cause for concern as a red flag appears. This should require an investigation, follow up, and potentially re-training and/or monitoring the person to help them correct their mistake and/or prevent fraud.”
Elisa Kearny, EMK Inc.
IT Controls
Information technology is another area where having a solid nonprofit internal control process in place is important. The accounting software behind your organization can help it run efficiently and effectively and the IT department must safeguard this aspect. Part of the control process over the IT department includes:
- Understanding who has access (and why)
- Careful monitoring of system users
- Written rules, regulations, and guidelines for technology use
- Change management processes
- Identification and routine updates of cybersecurity technology
- Training for all employees on how to counteract and prevent cyber-attacks.
Like financial controls, these are a few areas that organizations must manage carefully.
Get Innovative Internal Control Solutions at Your Office
Both financial and technology controls are important and can be used to help your organization avoid many problems, but the internal control process doesn’t end there. Make sure you are actively managing and monitoring internal controls.
The controls built into accounting software, as well as the overall controls and management systems you put in place over your IT department, must work together to build security. With active management and oversight, you can make technology your partner when it comes to accounting and internal controls. AccuFund helps you monitor, manage, and track your organization’s finances as part of the control process.
Often, when making a change at your organization, your hardest step lies in figuring out where to start. Make things easy on yourself by starting where you are. Look at your existing accounting software, and then call up your reseller for help figure out how you can optimize that system for better internal controls.
If your accounting system doesn’t allow for automation, give EMK a call.
For nearly 26 years, EMK Inc. has been helping nonprofits, municipalities and other government entities improve efficiency and automate internal controls with easy-to-use accounting software.
If you’re ready to learn more, schedule a tour of your internal control options with EMK.