Organizations have entered a new world since the onset of the Covid-19 pandemic. The Harvard Business Review reported over 47 million Americans voluntarily quit their jobs in 2021. CNBC reported a March 2022 survey found 44% of workers are seeking a new job. One of the biggest challenges facing many organizations is the turnover of accounting personnel.
It is essential to review and plan for possible turnover within your accounting department. One open position can unintentionally bypass your company’s internal controls, introduce fraud vulnerabilities, or create unintentional gaps in your financial reporting. Turnover in the accounting team can affect a company in many ways. You should review these higher-risk areas.
Cash receipts controls
Cash receipts include physical cash, credit card payments, and receipts of checks. Key controls include:
- Segregation of duties, including controls around the receipt of funds, input of payments, and approval of deposits.
- Timely reconciliation of bank statements by someone outside of the cash receipts function with proper approval and review of the reconciliation.
- Consider having proper background checks and bonding of employees who handle cash.
- Use a lockbox to mitigate the number of cash payments handled by employees.
- When errors occur and transactions need voided or refunds need made to a customer, a company should have clear processes with required approvals of such activity by supervisory or manager-level employees.
- Customer write-offs should have proper procedures requiring supervisory or secondary approval.
- New customer guidelines should address who can set up a new customer, what credit limits are appropriate, and approval of the new customer.
Cash disbursement controls
Cash disbursement includes traditional check payments but also covers electronic payments. Key control considerations for this area include:
- Segregation of duties, including controls around approval, input, and payment authorization.
- Ensure limits are set for check signers and limit the number of signers. You should consider approvals of unusual or significant transactions and documenting the activity.
- Those approving payments should obtain proper support, including a properly matched invoice with the purchase order and any receiving reports.
- Consider the process for approving new vendors and processes for validating vendors.
- When changing the vendor master file, processes should limit who can make and approve changes.
- Electronic payments can carry a high degree of risk. Ensure your bank(s) have call-back or secondary approval procedures and limits established for these payment types.
- Timely reconciliation of bank statements is critical. Another good process to consider is a daily supervisory review of bank activity by someone outside the disbursements cycle.
Purchase card and expense reports controls
Purchase cards (P-Cards) have become very popular with their convenience, rewards, and today’s spread-out workforce. Key considerations include:
- Limit access to community cards by keeping them in a secure location.
- Maintaining a list of cardholders, card numbers, and authorized limits.
- Require receipts for purchases/activity and establish supervisor approval of all card activity.
- Establish internal company policies for authorized purchases and limits.
With today’s connected environment, it is imperative to have appropriate information controls to protect access and information assets. Key questions include:
- How is former employee access to your network and information terminated?
- Is there a formal process for email, VPN access, and physical access to your business?
- Companies should have controls around trade secrets or other intellectual property to ensure the information’s integrity.
The quickest way to harm your organization’s reputation is making a payroll blunder. Critical payroll areas include:
- Segregation of duties such as approval, input, and payment authorization.
- Bank statements should be timely reviewed by someone outside of payroll processing.
- Maintain good processes and audit trails around payroll changes. Review any master file changes made during each payroll.
- When onboarding new employees, provide the proper documents and have sufficient document maintenance processes in place.
- Enrollment in health and benefit plans is a common trouble spot. Employees responsible for such activity should be familiar with the plans and kept aware of any plan changes.