In a recent post by Diligent, the company outlined the seven-step process to master the implementation of controls and ensure security.
Internal controls form a security cornerstone for any business. They guide employees to adhere to crucial safety practices, which ultimately ensures businesses maintain compliance with pertinent laws and regulations — if the controls are effectively implemented.
Although the implementation of internal controls can be intricate, its significance cannot be overlooked, particularly in the spheres of audit, cybersecurity, and compliance. In 2020, it was found that a staggering 32% of all workplace fraud was attributable to a dearth of effective internal controls.
This guide aims to shed light on the nuances of implementing internal controls. It covers what the implementation entails, the advantages it brings, the types and components of controls businesses should consider, a 7-step approach to implementation, and best practices for implementation.
Implementation of internal controls essentially involves the design and execution of methods, procedures, and protective measures that shield company systems and data from breaches and malicious entities. It calls for careful contemplation of how the system is configured and the processes employees are to follow.
Adopting established frameworks such as the COSO Internal Controls Framework, or crafting your own processes to validate operations and compliance procedures, is a step in the right direction. This involves assessing the control environment, identifying current and emerging risks, and establishing internal controls like access credentials that mitigate these risks.
The onus of implementing internal controls lies with the internal audit and accounting teams, but not solely. The CEO should lead in shaping the controls framework to be used by the organization. Moreover, the internal audit and accounting teams should report to the board to ensure that the controls satisfy all organisational and regulatory requirements. It’s crucial to remember that each employee plays a role in maintaining these controls. Internal controls can only succeed if all employees comprehend and adhere to them.
Implementing internal controls brings myriad benefits beyond just enforcing a uniform, company-wide process that ensures system and data security. It establishes common processes across the company, improves performance by providing accurate data for strategic decisions, enhances efficiency by streamlining processes, and reduces risk.
Implementing controls isn’t a one-size-fits-all proposition. An organisation’s requisite controls depend on various factors such as size, industry, systems, and employees. But effective internal controls share common characteristics, namely the three types of internal controls — preventative, detective and corrective, and several components of internal controls to consider.
The implementation of controls can seem daunting. However, breaking it down into a 7-step process makes it a manageable and constructive pathway toward secure systems and a conducive environment for cybersecurity and compliance. This includes creating a culture of compliance, assessing risk landscapes, designing and documenting controls, implementing these controls, deploying employee communication programs, establishing continuous control monitoring, and automating controls.
Implementing internal controls is a continuous process, not a destination. Following best practices ensures a clear and effective journey resulting in improved risk management and security. These best practices include building top-down support for internal controls, systematising implementation, explaining all internal controls thoroughly, and leveraging technology.
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