Imagine if you could have the same level of confidence reporting on your control environment as you do on your earnings guidance?
A CFO sits in a boardroom about to present to the Audit Committee, knowing that within a few slides, a list of control deficiencies is about to be presented by the External Auditor. The CFO is struggling to find the words to tactfully present this information without looking like they have no visibility into the control activities of their organization.
This debilitating situation occurs far too often for CFOs. So how can they get ahead of it?
A CFO is judged by Wall Street based on their ability to forecast a Company’s earnings. A great CFO can quickly translate how slight changes at a macro level will impact next quarter’s earnings. However, CFOs are often frustrated by their inability to manage Internal Audit and understand their control environments. There are 3 main reasons for this:
- Too Many Spreadsheets. A large company can have hundreds, if not thousands of controls activities that occur on a monthly, quarterly, or annual basis. Attempting to manage these controls on spreadsheets is both a time and a resource drain, mostly due to the countless hours spent on version control issues and reconciling their RCM and controls documentation.
- Control Activities Are Not Being Tracked. The lack of a mechanism which tracks control activities on a daily basis, and which has built in checks and balances, is a lost opportunity for CFOs to identify control gaps before External Auditors do.
- Limited and Outdated Resources. Finance organizations typically invest in tools that help them monitor and forecast more accurately, and are able to select from a wide variety of different solutions. Unfortunately, Internal Audit organizations are limited to a smaller selection of tools that can address their specific needs.
A CFO’s inability to manage Internal Audit and lack of visibility into their control environment can ultimately lead to severe problems for a company, including loss of revenue and inefficiencies.
- OPEX Pressure From Unnecessary Fees. After Internal Auditors retest a deficiency, External Auditors will incur non-value added billable hours when they perform additional substantive procedures to validate whether the deficiency has been remediated.
- Additional Strain On Already Stretched Resources. Control deficiencies not only cost money, they also consume resources. Remediation efforts force Internal Audit teams to spend additional time and effort to drive these efforts. Finance and accounting teams are also burdened - process owners who need remediation assistance typically reside in these teams. Since most finance and accounting organizations are already operating at maximum capacity, piling on more work can result in even more errors.
- Audit Committee Begins to Question Leadership. Numerous deficiencies can give the Audit Committee the impression that “the inmates are running the asylum” and management has no control over process owners. Since the optimal number of control deficiencies is zero, management must have constant visibility into control execution.
How Can CFOs Gain Visibility Into Their Control Environment?
Many Fortune 500 companies have found an effective solution to help CFOs better manage Internal Audit and effectively gain visibility into their control environments.
AuditBoard and WorkStream are the first tools to provide an automated, easy-to-use platform that connects your controls to the day-to-day activities performed by control owners, and outlines standard procedures for them. Below are the key benefits of AuditBoard:
- Checks and Balances: AuditBoard accounts for frequency of controls and their due dates, and automatically assigns controls to their appropriate preparers and reviewers.
- Real Time Tracking: Preparers and reviewers are automatically prompted to document their controls in real time with documents and required attachments.
- Workflow Automation: An automated workflow timestamps when a control was prepared and who signed off, making the entire trail audit-proof.
- Management Dashboards: The entire process syncs up to an automated dashboard, giving a Controller, CFO or CTO full visibility into where their gaps are today, and what department and what entity these specific preparers responsible for those gaps belong to.
With this information, CFOs can easily resolve control gaps and ensure those issues don’t snowball into bigger issues. Learn how companies such as TrueCar, HD Supply, Cornerstone OnDemand, PetSmart, and Express Scripts are using AuditBoard to manage their control environments and streamline SOX by requesting a demo today.