Importance of Re-evaluating Internal Controls in Remote Working Environment
June 22, 2021
The COVID-19 pandemic has forced many of us to work in a remote environment. It has also made us accustomed to various challenges along with it. It is overall a difficult adjustment for one to work away from an office environment into the recluse of work from home scenario. Every little one-on-one conversation has changed into an email, video call conversation with the entire team. Along with this, the household responsibilities and additional juggling of chores along with ensuring that work deliverables and targets are met, have become a daily challenge.
This has not just resulted in a social challenge but also made way for various internal control challenges. The internal controls of an organization designed for an office environment might not be able to operate in a remote workplace. Even the control procedures designed adequately may not be able to work properly.The Key Components of Internal Control
- Control Environment:It is a set of standards, structures, and procedures that fulfil the basis for carrying out internal controls across enterprises. The senior management establishes the tone at the top related to the importance of internal control including expected standards of conduct.
- Risk Assessment: it is an assessment of operational issues that might impact an enterprise, and trying to resolve and eliminate those issues.
- Control Activities: Control Activities are procedures, policies, and mechanisms that ensure that management’s response to identify risks is carried out efficiently. In other words, these are actions taken to minimize risks.
- Information & Communication: One of the key aspects of the operations taking place during the pandemic is information & communication. This is because everything is happening through various online modes of communications such as the telephone, internet, and so on.
- Monitoring: Monitoring is a process involving various methods of evaluations by the enterprise management to identify any issues and to communicate those issues to the respectively aligned parties for a resolution.
- Statutory Compliance: the development and establishment of a statutory compliance system is one of the most crucial aspects of the smooth functioning of and appropriateness of any organization’s internal control.
Needless to say, that the above components of internal control can experience a setback or an alteration in crucial times like the pandemic. COVID-19 has brought in the need for establishing a remote-control environment as well as being able to handle it well. Ethics, governance, and policies play a big role in setting up expectations about workplace conduct and behaviour.
But most importantly, it is required to analyse if an organization needs to revise its existing internal controls or to completely replace them with newer ones.Why Do Internal Controls Require a Re-Evaluation under Remote Working Environments?
The evaluation of internal controls is an examination of the control systems. By evaluation of the control processes, especially in a changed or remote work environment, an auditor can examine the extent to which tests must be performed to conclude whether a set of control systems should be revised or completely changed. It makes a way to reach fairness in the situation on the exact details of the control procedures/financial statements that need to be worked upon. An accurate evaluation of these control processes reduces the risk of fraudulent activities as well.The major issues that revolve around control system revisions concern:
- Segregation of duties;
- Safeguarding records;
- Learning and development of employees;
- Effectiveness of internal audit function; and
- Checks and balances.
- Determining the extent and types of control used by the client
- Understanding the controls on which the auditor expects to rely upon
- Determining which of the audit processes should be expanded or reduced
- Recommending clients regarding the improvement of system controls
- Efficient monitoring of a business
- Safeguarding of assets
- Prevention and detection of errors
- Accuracy and completeness of the accounting records
- Timely preparation of reliable financial information
We at MBG, ensure that all your internal control procedures are met in a remote working environment. Our suite of services specially designed for crises such as this pandemic aims to help you to analyse and restructure the control procedures through this “new normal”. Our Specialists are seasoned professionals in tune with the trending possibilities and resolutions of bringing a positive change in your business through the COVID pandemic.Our Methodology
The methodology that we follow through the process of re-evaluation of control systems for a remote working environment follows:
- Understanding and evaluating the existing processes and policies of a controlled environment and the challenges that they represent. This is the first step towards understanding if a control system needs to be improved or changed
- Designing “process flows” to fit the peculiar need of each business in coordination with stakeholders
- Defining Internal Control Systems/Risk Control Matrix to ensure compliance with process expectations (incl. remote environment working)
- Testing the compliance with controls and modify control environment for respective remediation
The key deliverable of the control re-evaluation services that MBG offers, include:
- Drafting/Updating of process flows with linkages to Risk Control Matrix
- Drafting/Updating of Risk Control Matrix which includes controls, objective, risk
- Testing of controls as per the sampling methodology suggested by ICAI guidance note
- Remediation plan for the cases wherein controls are failing
Control re-evaluation being crucial to your business, especially during the pandemic will help you bring your business operations back on track. It helps in combating any tricky situation that you might face along with decreasing the adverse impacts of the pandemic.Following are the key benefits to expect
- Identification of:
- Control Weakness
- Operational Inefficiencies
- Cost Control Opportunities
- Deviation from Best Practice
- Procedural and Regulatory Non-compliances
- Handling operational effectiveness during the lockdown and managing business disruption
- Optimizing utilization of resources including manpower and reducing complexities from the value chain
Each of the components mentioned above, along with many in-betweens is of great significance and detailing. In a crisis, or adaptation to the “new normal”, many organizations are going through a change. During this change, it might be very possible and crucial for them to look for additional assistance from a trusted professional. We, at MBG, are at your service to cover all your business concerns as per your needs.Our Service Deck:– Development & Assessment of Controls in remote working environment