Christine H. Doxey - Internal Controls Toolkit

1. Chapter 9

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The Wiley Corporate F&A series provides information, tools, and insights to corporate professionals responsible for issues affecting the profitability of their company, from accounting and finance to internal controls and performance management.

Christine H. Doxey

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Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
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Library of Congress Cataloging-in-Publication Data

Names: Doxey, Christine H., 1955- author.

Title: Internal controls toolkit / Christine H. Doxey.

Description: First Edition. | Wiley : Hoboken, New Jersey, [2019] | Series: Wiley corporate F&A series | Includes index. |

Identifiers: LCCN 2019011646 (print) | LCCN 2019021944 (ebook) | ISBN 9781119554400 (Adobe PDF) | ISBN 9781119554417 (ePub) | ISBN 9781119554394 (hardcover)

Subjects: LCSH: Managerial accounting. | Auditing, Internal. | Corporate governance.

Classification: LCC HF5657.4 (ebook) | LCC HF5657.4 .D69 2019 (print) | DDC 658.15/11dc23

LC record available at https://lccn.loc.gov/2019011646

Cover Design: Wiley
Cover Image: Liyao Xie/Getty Images

Companies of all sizes are subject to a variety of risks. Among them are legal, regulatory, strategic, operational, financial, and reputational. Each functional organization is subject to one or more of these types of risk, each of which may impact the company's bottom line. Companies use a number of policies and tools, such as insurance, establishment of reserve funds, and investment policies, and standards of control to manage risk.

The concept of internal control is one of the trademarks of effective governance and good business operations. Without a strong system of internal control, organizations cannot ensure that the interests of company stakeholders are being protected. Strong internal controls support organizational goals and objectives, while helping safeguard against the risks of financial loss, operational waste, environmental irresponsibility, corporate fraud, and even reputational damage that can be irreparable. Internal control over financial reporting continues to be a major area of importance in the governance of an organization.

This toolkit provides a series of standards of internal control and the risks they mitigate for all enterprise-wide operations. The fraud risks for today's corporate environment are significant as indicated by the statistics provided in the following sections. The standards will set the foundation for good control and will help to mitigate the risk of fraud. According to the 2018 Report to the Nations prepared by the Association of Certified Fraud Examiners (ACFE), Anti-fraud controls work. The ACFE analyzed 18 anti-fraud controls were analyzed and every one correlated to lower fraud losses and faster fraud detection.

PwC's 2018 Global Economic Crime and Fraud survey states that:

• 49% of organizations globally said they've been a victim of fraud and economic crimeup from 36%.
• 64% of respondents said losses due directly to their most disruptive fraud could reach US$1 million.
• 52% of all frauds are perpetrated by people inside the organization.
• 31% of respondents who suffered fraud indicated they experienced cybercrime.