Financial Controls

1. Financial Controls David Cox: haysmacintyre Partner0207 969 5564email: dcox@haysmacintyre.com

2. Financial Controls • Introduction • Your examples • Types of controls • Interactive Workshop • Examples • Summary • Questions

3. Introduction Financial controls are checks and procedures that help directors/trustees: • meet their legal duties to safeguard assets; • administer finances and assets in a way that identifies and manages risk; and • ensure the quality of financial reporting

4. Internal control - the auditors definition The process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity’s objectives with regard to: • reliability of financial reporting, • effectiveness and efficiency of operations, and • compliance with applicable laws and regulations.

5. Reducing risk Financial controls reduce the risk of losses through: • Theft and fraud; • Bad decisions; • Human error; • Breaches of controls; • Management override of controls; and • Unforeseeable circumstances

6. Your examples • Discuss with your neighbour and identify five examples of financial controls • For each control identified, describe exactly how and when the control operates

7. Your examples 1. 2. 3. 4. 5. 6. 7. 8.

8. Types of controls • Supervisory and detective • Detailed and preventative

9. Detailed controls • Will operate every time a transaction is processed by the system • Will occur before the transaction is processed • Example: authorisation of a purchase invoice • Preventative by nature - will stop errors occurring • Usually operate many times in a year

10. Supervisory controls • Will operate at intervals of time • Will occur after the figures (eg for the month) have been prepared • Example: budgetary control or checking of aged debtors list • Detective by nature – will identify errors that have occurred so that they can be corrected • Will usually operate only a few times in a year (often monthly)

11. Types of financial controls • Authorisation • Performance reviews • Information processing • Physical controls • Segregation of duties

12. Interactive workshop • Review the notes of the systems notes • Identify any weaknesses in the financial controls • Design controls that would improve the system

13. Interactive workshop • Weaknesses • Controls

14. Interactive workshop • Examples of sensible controls

15. Electronic banking • Administrative controls • Payment set-up controls • Authorisation controls

16. Examples of fraud • Real life examples • How could they have been prevented? • How could they have been detected (quicker)?

17. What should you do? • Review your own controls • Perform a risk assessment • Commission a controls or risk review • Liaise with your auditors

18. Summary • Financial controls reduce (but do not eliminate) the risk of losses through fraud and errors • Electronic banking risks • Frauds becoming more commonplace • Risk assessments and reviews

19. Questions ? David Cox dcox@haysmacintyre.com 020 7969 5564