Effective Internal Controls by @EricPesik
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Instilling good governance and ensuring full compliance with an effective internal control program. Presented at Corruption and Compliance South & South East Asia Summit, September 2012, Hilton Hotel, Singapore.
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Effective Internal Controls by @EricPesik
- 2. Presented by Eric Roring Pesik at Corruption and Compliance South & South East Asia Summit September 2012 Hilton Hotel, Singapore
- 5. finance & accounting procedures
- 7. company policies & procedures
- 12. take your order
- 14. serve your order
- 15. pay for your order
- 19. 1. simple 2. effective 3. efficient
- 20. organic controls
- 22. internal control is a process
- 26. 1. process 2. people 3. assurances 4. objectives
- 28. human framework
- 29. human laziness
- 31. human dishonesty
- 32. 1. laziness 2. carelessness 3. dishonesty
- 33. human framework
- 43. 1. segregation of duties 2. retention of records 3. super vision or monitoring 4. information processing 5. authorization of transactions 6. top-level reviews 7. electronic security 8. physical security
- 46. risk focused
- 47. risk assessment
- 48. High Magnitude High Magnitude Low Probability High Probability Magnitude of Loss Low Magnitude Low Magnitude Low Probability High Probability Probability of Risk risk matrix
- 50. risk experts
- 52. objective data
- 53. sources of data
- 55. Corruption 51% Billing 19% Non-Cash 19% Expense Account 14% Skimming 13% Cash on Hand 11% Cash Larceny 9% Check Tampering 7% Financial Statement 7% Payroll 4% Cash Register 2% probability of the risk
- 56. Financial Statement $1,730 Corruption $175 Check Tampering $131 Billing $128 Cash Larceny $100 Non-Cash $90 Payroll $72 Skimming $60 Expense Account $33 Cash on Hand $23 Cash Register $23 magnitude of the loss
- 57. Financial Statement 10.0 Corruption 7.4 Billing 2.0 Non-Cash 1.3 Check Tampering 0.7 Cash Larceny 0.7 Skimming 0.6 Expense Account 0.4 Payroll 0.2 Cash on Hand 0.2 Cash Register 0.0 adjusted risk profile
- 59. Sales 21.0% Operations 15.4% Accounting 15.1% Exec/Upper Mgmt 14.0% Purchasing 10.7% Warehousing/Inventory 4.0% Finance 4.0% Customer Service 3.3% Marketing/Pub Relations 2.9% Board of Directors 2.9% Mfg and Production 2.2% Human Resources 2.2% Information Technology 1.5% Internal Audit 0.4% Research and Dev 0.4% Legal 0.0% probability of the risk
- 60. Exec/Upper Mgmt $829 Board of Directors $800 Legal $566 Purchasing $500 Finance $450 Marketing/Pub Relations $248 Warehousing/Inventory $239 Human Resources $200 Accounting $180 Mfg and Production $150 Operations $105 Research and Dev $100 Sales $95 Information Technology $71 Customer Service $46 Internal Audit $13 magnitude of the loss
- 61. Exec/Upper Mgmt 10.0 Accounting 3.5 Purchasing 2.8 Operations 1.7 Finance 1.7 Sales 1.1 Warehousing/Inventory 1.0 Board of Directors 1.0 Marketing/Pub Relations 0.4 Customer Service 0.3 Legal 0.2 Human Resources 0.2 Mfg and Production 0.2 Information Technology 0.2 Research and Dev 0.0 Internal Audit 0.0 adjusted risk profile
- 62. external data
- 63. internal data
- 65. human laziness
- 67. human dishonesty
- 68. risk experts
- 71. risk inventory
- 74. risk matrix
- 76. 1. segregation of duties 2. retention of records 3. super vision or monitoring 4. information processing 5. authorization of transactions 6. top-level reviews 7. electronic security 8. physical security
- 78. cost of mitigating or avoiding
- 79. follow the money
- 80. Hotline 59.2% Employee Support Programs 59.0% Surprise Audits 51.5% Fraud Training for Managers/Execs 50.0% Fraud Training for Employees 50.0% Job Rotation/Mandatory Vacation 46.8% Code of Conduct 46.6% Management Review 40.0% Anti-Fraud Policy 40.0% External Audit of ICOFR 34.9% Internal Audit Department 30.6% Independent Audit Committee 30.0% External Audit of F/S 25.0% Management Certification of F/S 25.0% Rewards for Whistleblowers 23.2% effective loss reduction
- 81. Hotline $100 $245 Employee Support Programs $100 $244 Surprise Audits $97 $200 Fraud Training for Managers/Execs $100 $200 Fraud Training for Employees $100 $200 Job Rotation/Mandatory Vacation $100 $188 Code of Conduct $140 $262 Management Review $120 $200 Anti-Fraud Policy $120 $200 External Audit of ICOFR $140 $215 Internal Audit Department $145 $209 Independent Audit Committee $140 $200 External Audit of F/S $150 $200 Management Certification of F/S $150 $200 Rewards for Whistleblowers $119 $155 benefit of loss reduction
- 82. risk detection
- 83. Tip 42.3% Internal Audit 14.3% Management Review 11.3% By Accident 8.9% External Audit 5.8% Account Reconciliation 5.5% Document Examination 4.4% Surveillance/Monitoring 2.7% Confession 2.4% Notified by Police 1.7% IT Controls 0.7% detection method
- 84. Employee 49.2% Customer 17.8% Anonymous 13.4% Vendor 12.1% Shareholder/ 3.7% Owner Competitor 2.5% Perpetrator's 1.8% Acquaintance source of tips
- 85. With Hotline 47.1% Tips Overall 42.3% No Hotline 33.8% companies with hotlines
- 86. With Hotline 47.1% Tips Overall 42.3% No Hotline 33.8% 13.3% companies without hotlines
- 89. follow the money
- 90. recap
- 92. 1. simple 2. effective 3. efficient
- 93. 1. process 2. people 3. assurances 4. objectives
- 94. 1. laziness 2. carelessness 3. dishonesty
- 95. 1. segregation of duties 2. retention of records 3. super vision or monitoring 4. information processing 5. authorization of transactions 6. top-level reviews 7. electronic security 8. physical security
- 96. risk focused
- 97. objective data
- 98. follow the money
- 99. questions?
- 101. License and Credits This presentation, excluding the images, is provided under creative commons attribution license. http://creativecommons.org/licenses/by/3.0/ You are free to share, copy, distribute, and transmit this work; to remix, adapt this work; and to make commercial use of the work; under the condition that you attribute this work to me by including the following attribution “Effective Internal Controls by Eric Pesik. Used with permission,” and URL Link: http://www.slideshare.net/ericpesik/ Microsoft Office Online: Except as noted below, all images in this presentation are from Microsoft Office Online. Used with permission from Microsoft: http://office.microsoft.com/en-us/images/ Flickr Creative Commons: The following images are from flickr creative commons and are licensed and used under creative commons attribution license: http://creativecommons.org/licenses/by/2.0/deed.en Art Coffee House Waitress by Wonderlane http://www.flickr.com/photos/wonderlane/293137892/ Waitress by Adikos http://www.flickr.com/photos/adikos/4319818916/ Rutherford Grill by Neeta Lind http://www.flickr.com/photos/neeta_lind/2517034517/ Serving Food by Adrian Nier http://www.flickr.com/photos/adriannier/4004167201/ Donut Shop Owner by Robert Couse-Baker http://www.flickr.com/photos/29233640@N07/7104455917/ Two chorizo burritos with cheese and sour cream by Rick http://www.flickr.com/photos/spine/1994814081/ Waiter by Hans Van Den Berg http://www.flickr.com/photos/myimage/4353456304/ Blue Telephone by UggBoy♥UggGirl http://www.flickr.com/photos/uggboy/5345135964/ Association of Certified Fraud Examiners: All data is from the Association of Certified Fraud Examiners, Report to the Nations on Occupational Fraud and Abuse, 2010 Global Fraud Study based on 1,843 cases of occupational fraud that were reported by the Certified Fraud Examiners who investigated them. http://www.acfe.com Committee on Sponsoring Organizations of the Treadway Commission: The Internal Control — Integrated Framework was commissioned by the Committee on Sponsoring Organizations of the Treadway Commission. It establishes a common definition of internal control that services the needs of different parties for assessing and improving their control systems. http://www.coso.org