Internal controls are (or at least should be) implemented for a specific reason – to mitigate risks. Organisations that are risk conscious strive to provide transparency over the continued ability of their controls to achieve this objective. This can be in reaction to strict regulatory requirements which enforce the need to evaluate their controls periodically, or can be driven purely from a good practice perspective and a desire to manage risks effectively within their organisation.
Whatever the reason there are several ways in which controls can be evaluated to determine whether they are designed/operating effectively or not. A common traditional method is based on manual sample testing using pre-defined test plans. Whilst this sampling approach can produce test results which are representative of a controls total population, based on the use of statistical sampling techniques, it can also be extremely resource intensive. This notion that controls need to be evaluated in this way is a common reason why organisations shy away from their own control assessments, and instead choose to brace themselves for documented control failures as part of the annual external audit report.
This is not a particularly healthy way to manage the internal control environment, and is also not necessary. The use of surveys to perform control self-assessments can be an effective strategy providing valuable insights into the status of your internal controls, as well as being relatively non-invasive for those involved. Although this efficient method for gathering control-related information cannot completely replace all manual sample-based testing activities, particularly within those organisations for whom regulations such as Sarbanes-Oxley dictate management testing as a specific requirement, it can at least become part of the overall testing strategy and help to relieve the manual effort associated with controls testing.
For those organisations which don’t have any such obligations, this “light touch” approach can be extremely effective in providing a periodic controls health check, helping to allocate responsibilities for operating and/or overseeing controls, and at the same time developing an essential risk and controls culture. This functionality is central to the control evaluation capabilities available in SAP Process Controls, and this evaluation method, together with automated controls monitoring, can both strengthen and streamline your current controls assurance activities.