5 Factors That Stress Your Internal Controls

  • Article

Heavy workload, organizational changes and unclear expectations are among the common contributors to workplace stress, but did you know these factors could also directly impact your internal controls? Not only can stressed internal controls affect your profitability, but also place your business at higher risk for fraud, as Doeren Mayhew’s internal auditors often find. Common business occurrences resulting in stressed internal controls include:

  1. High employee turnover, changes in organizational structure, lack of training and rapid growth. Such scenarios in your business may cause your internal controls to either cease working, or become inconsistent or unreliable.
  2. Improper supply chain. An effective supply chain ensures you are receiving quantity discounts and optimal prices for goods being purchased. For example, a transportation company purchasing products from various parts of the country was paying higher prices because bids were not obtained. A proper supply chain would ensure the company obtains bids from suppliers and receives the best prices.
  3. Holes in your accounts payable process. Are you paying invoices on time? Are you certain you are not overpaying? Are the proper discounts being taken? If you are unsure of the answers to these questions, then your controls may need to be reassessed.
  4. Lax procedures. Your internal controls may not be performing as designed because job responsibilities are not being fulfilled by employees. A Doeren Mayhew client assumed the company’s controller was approving all financial transactions, but a risk assessment determined that this process was not being followed.
  5. Change. Whether it comes from within your organization or from outside forces such as regulations or industry trends, change challenges and stresses all systems of internal control. For example, the government may add a new type of tax on your product, requiring a significant change to your systems.

If your business is experiencing any of these factors, consider looking at the “blueprint” design of your internal controls. Also, conduct management reviews to maintain efficiency and effectiveness. To determine the effectiveness of your internal controls, contact Doeren Mayhew’s internal auditors in Houston, Michigan or Ft. Lauderdale.

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