Manage your financial risk using internal controls

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Manage your financial risk using internal controls

• R. Curtis Thompson, CPA.CITP, CISA

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Introduction

• My Background
• Firm Information
• Objective of Todays Presentation

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Agenda
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Internal Controls Defined

• What are they and how do we develop them?

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Internal Controls

• What are they?
• What are they not?
• Fraud Prevention
• Error Reduction

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Internal Controls

• Frameworks
• COSO
• CobiT

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COSO
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Components of a Good Control

• Policy
• Communication
• Procedures
• Monitoring

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Internal Controls

• Entity Level Controls
• Process Level Controls
• Automated Controls
• Manual Controls

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Internal Controls

• Controls will vary by Company
• Policies are Critical
• Tone at the Top
• Preventive Detective
• Small Companies Rely on Management Oversight

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Process Flows

• How do processes effect Financial Reporting?

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Process Flows

• Financial Reporting
• What Drives the Financial Reports?
• Identifying Processes

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Financial Reporting

• Balance Sheet
• Income Statement

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Financial Reporting

• Balance Sheet

• Income Statement

• Moment in Time
• Assets Liabilities
• Owners Equity

• Period of Time
• Income Expenses
• Revenue

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Processes Flow into Financials

• Process

• Financial Statement

• Time Billing
• Collections
• Procurement Payables
• Payroll

• Income
• Accounts Receivable
• Expenses
• Assets
• Liabilities

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Process Time and Billing

• Time Entry Policies
• Reporting
• Review Procedures
• Billing Responsibility
• Invoices Statements
• Aging Collections

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Process Time and Billing
Accounts affected

• Work in Process
• Accounts Receivable
• Revenue
• Cash
• Payroll
• Partner Capital Accounts

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Process Procurement - Payment

• Procedures for purchasing
• Posting
• Review Approval
• Account Reconcilement

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Process Employee Expenses

• Policies
• Formal Reporting
• Corporate Credit
• Reviews

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Fraud

• How Can Fraud be Perpetrated in Your Industry?

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Fraud?

• Dr. David Fisher
• 80 rotating floors
• Dubai
• In a biography he had been distributing for
  months, he said...he received an honorary
  doctorate from "The Prodeo Institute at Columbia
  University in New York." No such institution
  exists, however, and Columbia said it had never
  awarded Fisher an honorary degree.

"Dr. Fisher did receive an honorary doctorate in
Economics from Pre Deo University, but it has
been removed from his bio because he wants to be
entirely accurate and cannot be with this
information."
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Fraud

• Motivation
• Opportunity
• Rationalization

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Fraud Statistics
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Fraud Statistics
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Fraud Tree

• Billing Schemes
• Write-off Schemes
• Payroll
• Expense Reimbursements
• Check Tampering
• Corruption / Bribery

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Fraud?
A Derby man is facing up to 10 years in jail
after pleading guilty to illegally selling
expensive CAD software at massively reduced
prices.The AceCad software, which has been used
in high-profile projects like London's "Gherkin"
building, sells for thousands of pounds Michael
Walton was selling illegal copies of the software
on eBay for just 12 pounds (US24.60).
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Fraud

• Fraudulent Disbursements

• Billing
• False Vendors
• Personal Expenses
• Overbilling
• Payroll
• Ghost Employees
• Expense Reimbursements

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Fraud

• Fraudulent Disbursements
• Case Studies

• QuickBooks Fraud
• Administrative Staff
• Reconcilement Fraud

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Fraud

• Travel Expense Fraud

• Expense Misclassification
• Creating Fictitious Expenses
• Claiming Multiple Reimbursements
• Tone at the Top
• Require Original Documentation

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Fraud

• Travel Expense Fraud
• Case Studies

• Forged Receipts
• Mileage scam

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Information Technology

• The Risks and How to Reduce Their Likelihood and
  Impact

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Information Technology

• Reliance
• Impact
• Expense

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Information Technology
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Security

• Maintain and Support Internal Controls
• Confidential Information
• Protection from Technical Attacks

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Security

• Policies
• User Accounts Passwords
• Firewalls
• Monitoring

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Availability

• Business Continuity
• Disaster Planning
• Redundancy
• Service Level Agreements

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Availability

• Business Continuity Plan
• Disaster Plan
• Back ups
• Disaster Site
• Vendor / Employee Contact Information
• Environmental Protection
• Surge Suppressor UPS
• Heat Humidity
• Fire

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Integrity

• Processing Integrity
• Application Controls
• Data Interchange

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Privacy

• Internal Documents
• Employee Information
• Financial Information
• Client Information

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Thank You!

• Questions?

R. Curtis Thompson, CPA.CITP, CISA Yount, Hyde
Barbour, PC 4405 Cox Road, Ste 225 (804)
553-1900 curtis.thompson_at_yhbcpa.com