Internal controls are the quality control of financial reporting and accounting. They operate in and around every layer of financial control, asset use and disclosure, ensuring risk assessment and control structures are in place and being diligently adhered to by every financial stakeholder in any given business.
Internal controls provide value by their guidance, understanding of financial laws and regulations and, where necessary, their suggestion and roll out of control amendments, to guarantee a clear audit trail, accurate financial reporting and a professionally managed, diligent system of financial control.
This role is the most important bulwark against fraud and mismanagement of assets. Financial safeguarding and ensuring compliance is a central component of internal controls.
However, the responsibility of internal controls (and that of the team whose job it is to guarantee internal controls) is not a fixed role, like an accountant or treasurer. internal controls is essentially the responsibility of the CFO, or Board of Directors.
Depending on the size of the enterprise, financial assets under control and/or the specific financial services industry they work in, internal controls can be expanded into a full role, or even department, to ensure seamless and accurate financial reporting and security.
This means internal controllers need to be both aware of auditing, accounting best practice, legal and compliance. This, of course, necessitates a diligent and intelligent financial professional to do this job.
Please visit our job description page to find out more about the day to day responsibilities of an internal controller.
Step 1 – Know your industry
It’s vitally important anyone considering a role as internal controls considers the specificity of auditing within the industry they work in.
A solid grasp on internal auditing, financial operations, compliance, segregation of duties, authorisation, and physical controls (still important even in a post-COVID world) is essential to do the job properly. Considering the seriousness and potential for error in financial reporting and auditing, plus the pressures on internal controls to mitigate fraud and mismanagement, this role is highly pressured but rewarding for those professionals who seek a challenge.
Step 2 – Know your audit
Understanding the critical and operational differences between auditing is a central component of becoming an internal controller.
- Internal audit: Internal review of accounting practice, finance operations safeguarding, and risk identification
- Systems audit: The testing and evaluation of the controls of the above list
- Compliance test: Are the controls being applied in the right way
- Probity audit: Detection of fraud or malpractice
- Social audit: Governance, accountability and fairness of management and financial handling
Step 3 – Career pathways
As mentioned above, the responsibility for internal controls covers a wide professional base, and is determined by the size and nature of the business.
To become an internal controller, you must have extensive experience in financial reporting; auditing; strong analytical skills; procurement and cash flow; debt; tax returns and accounting; at least a Bachelor’s Degree in fields such as finance, business administration and accounting; and if possible an Internal Audit Practitioner Certification from the Chartered Institute of Internal Auditors or an equivalent body.
For smaller companies, sole traders, and the self-employed, internal controls generally fall under the jurisdiction of the CEO, Founder or sole employee.
The larger the company, the more that other leading financial figures – CFOs, COOs – have to take responsibility. Generally speaking, a Board of Directors will stipulate who is ultimately responsible for internal controls and audit trails. This could remain in the boardroom, or could be seconded to a department within the enterprise.
For those who are of a mind to enter the auditing industry, or have the drive to become senior management within finance, becoming an internal controller or having responsibility for internal controls on your resume will stand you in good stead.
Find out more about life as an internal controller and other details by following the below links:
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