FRAUD

No, not in my company...would you bet your company's life on it?

Since the Enron scandal, auditors, regulators and financial statement users have placed a renewed emphasis on evaluating a company's system of internal controls and producing reliable financial reports.  Business owners are being called upon to understand and explain their company's internal controls and, in some cases, to attest to its reliability.

Auditors may make observations and suggestions about internal control as part of performing their financial statement audit.  Business owners may see the annual audit as a deterrent, a means to help control the risk of loss due to fraud, but the independent auditor is not part of their client's internal control. The financial statement audit does not find or correct errors in the information used every day to manage the organization or to detect fraud.

The business owner, board of directors (if one exists) and the company's management team shares the ultimate responsibility for establishing and maintaining the organization's internal control system.  Only management has the ability and the authority to analyze the various elements of internal control, make decisions, supervise and otherwise ensure that the system functions effectively.

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