The Master Guide to Controllers' Best Practices

Elaine Stattler, Joyce Anne Grabel, Elaine Stattler, Joyce Anne Grabel

• Publisher: Wiley
• Year: 2020
• ISBN:
  9781119723332
• Edition: 2
• Topic: Negocios y empresa
• Subtopic: Contabilidad

The essential guide for today's savvy controllers

Today's controllers are in leadership roles that put them in the unique position to see across all aspects of the operations they support. The Master Guide to Controllers' Best Practices, Second Edition has been revised and updated to provide controllers with the information they need to successfully monitor their organizations' internal control environments and offer direction and consultation on internal control issues. In addition, the authors include guidance to help controllers carryout their responsibilities to ensure that all financial accounts are reviewed for reasonableness and are reconciled to supporting transactions, as well as performing asset verification.

Comprehensive in scope the book contains the best practices for controllers and:

• Reveals how to set the right tone within an organization and foster an ethical climate
• Includes information on risk management, internal controls, and fraud prevention
• Highlights the IT security controls with the key components of successful governance
• Examines the crucial role of the controller in corporate compliance and much more

The Master Guide to Controllers' Best Practices should be on the bookshelf of every controller who wants to ensure the well-being of their organization.

In addition to their traditional financial role, today's controllers (no matter how large or small their organization) are increasingly occupying top leadership positions. The revised and updated Second Edition of The Master Guide to Controllers' Best Practices provides an essential resource for becoming better skilled in such areas as strategic planning, budgeting, risk management, and business intelligence. Drawing on the most recent research on the topic, informative case studies, and tips from finance professionals, the book highlights the most important challenges controllers will face.

Written for both new and seasoned controllers, the Guide offers a wide range of effective tools that can be used to improve the skills of strategic planning, budgeting, forecasting, and risk management. The book also contains a resource for selecting the right employees who have the technical knowledge, analytical expertise, and strong people skills that will support the controller's role within an organization. To advance overall corporate performance, the authors reveal how to successfully align strategy, risk management, and performance management. In addition, the Guide explains what it takes to stay ahead of emerging issues such as healthcare regulations, revenue recognition, globalization, and workforce mobility.

As controllers adapt to their new leadership roles and assume more complex responsibilities, The Master Guide to Controllers' Best Practices offers an authoritative guide to the tools, practices, and ideas controllers need to excel in their profession.

SECTION 1
Overseeing Governance, Compliance, Risk Management, and Internal Controls

INTRODUCTION

Controllers and financial managers have a fiduciary duty to report significant deviations from company policy in the areas of business ethics, compliance, and financial reporting to the organization’s Chief Financial Officer (CFO), Chief Audit Executive (CAE), and senior management.

Internal controls are an integral part of an organization and are designed to provide reasonable assurance of achieving effective and efficient operations, reliability of financial reporting, and compliance with applicable laws and regulations. Internal controls include the plans, methods, and procedures used to meet missions, goals, and objectives. Internal controls also serve as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. In short, internal controls help senior leaders and managers achieve desired business results.

Internal control is a system that is communicated and implemented across the organization and is usually the responsibility of the controller. Controllers and their staffs are in a unique position to see across all aspects of the operations they support. As such, they are responsible for monitoring the internal control environment and for providing guidance and consultation on internal control issues. Additionally, they have the responsibility to ensure that all financial accounts are reviewed for reasonableness and are reconciled to supporting transactions, and that asset verification is performed.

This section contains the following chapters:

• Tone at the Top and Corporate Governance
• Risk Management, Internal Controls, and Fraud Prevention
• IT Security Controls
• The Crucial Role of the Controller in Corporate Compliance

CHAPTER 1.
TONE AT THE TOP AND CORPORATE GOVERNANCE

Chapter 1, Tone at the Top and Corporate Governance, includes the following best practices to help establish a code of ethics and to develop the foundation for excellent corporate governance:

Chapter 1. Tone at the Top and Corporate Governance

Defining Tone at the Top

Implementing Tone at the Top

IMA’s Statement of Ethical Professional Practice

MCI’s Code of Conduct

Fostering an Ethical Climate

Promoting Trust

Creating Policies and Procedures for Your Code of Conduct

Tips for Implementing and Managing an Ethics Hotline

Corporate Governance for Small Business

Examples of Company Codes of Ethics

Sample Template for Company Code of Ethics

Understanding the Sarbanes-Oxley Act of 2002 (SOX)

Combating Corporate and Accounting Fraud

Tips for Better Financial Reporting and Analysis Under SOX

Making Good Use of Your Disclosure Committee

Using Audits to Boost Performance and Revenue

Acknowledgements, Resources, and Endnotes

DEFINING TONE AT THE TOP

Tone at the Top is an expression that is used to define management’s leadership and commitment to openness, honesty, integrity, and ethical behavior. It establishes the integrity of a company and directs how employees, shareholders, and stakeholders of a company comport themselves.

Behavior at the management level has a trickle-down effect on all employees. If management demonstrates honesty, integrity, and ethics, it sets a cultural climate that encourages employees to behave in the same way.

Employees are keenly aware of the practices and rules followed by senior management and owners. Insider or related-party dealings, circumvention of internal controls, and favorable key-employee treatment are just three examples of management looking out for management, often at the expense of the stakeholders and employees of an organization.

The Institute of Business Ethics states that organizations often have a set of ethical and operational values that they aspire to uphold in carrying out their business. These values guide acceptable, desirable, and responsible behavior—above and beyond compliance with laws and regulations. To support ethical values, the organization should have an ethics policy that:

1. Communicates an organization’s ethical values, standards, and commitments to stakeholders that will underpin the way that it does business;
2. Confirms leadership commitment to the above;
3. Describes how this will be achieved and monitored through an ethics program;
4. Identifies the main ethical issues faced by the organization; and
5. Identifies other policies and documents that support and detail aspects of the ethics policy—such as a code of ethics, a speak-up policy, a bullying and harassment policy, a gifts and hospitality policy, and an environmental policy.

Tone at the top must be constantly communicated and enforced so that there is a clear understanding of the company’s emphasis on ethical behavior. Employees must understand the consequences if there is a violation of the tone at the top. Integrating the tone at the top within the corporate governance structure is considered a requirement for public companies and is looked upon as a best practice for private companies.

IMPLEMENTING TONE AT THE TOP

As a best practice, companies and organizations of all sizes should implement a code of conduct to support their tone at the top message.

Any organization that fails to abide by a moral code risks losing its reputation in the marketplace and the loyalty of its customers, suppliers, employees, and other stakeholders. Violations can result in a significant loss of revenue—or even lead to bankruptcy. So it behooves both public and private companies to adopt strong internal controls to ensure ethical conduct.

In the public arena, financial gains can begin to create a haze over core values among some corporate leaders. The famous fall of Enron is a prime example of how executive management at a public company violated a company’s code of ethics.

Improper behavior such as this by senior management led to changes in legislation pertaining to the roles and responsibilities of accounting and finance leadership. The violation of accounting standards drove the Securities and Exchange Commission (SEC) to closely look at the segregation of duties and the values of management running public companies.

The SEC made significant disclosure requirements regard...