Internal controls over financial reporting | KPMG | CA

Internal controls over financial reporting

Internal controls over financial reporting

Designing a healthy program that evolves to meet changing needs.

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Partner, Energy and Natural Resources

KPMG in Canada

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In this series of white papers, KPMG's Risk Consulting practice looks at how companies can design a 'healthier' internal controls over financial reporting (ICOFR) approach to better manage risks, reduce costs, and find opportunities to improve operational performance.

Designing a healthy program that evolves to meet changing needs

Responsible individuals, even if they have not had serious health issues in recent years, still have regular medical checkups. Similarly, companies whose ICOFR programs appear to be running smoothly should still periodically evaluate the health of their ICOFR program and controls portfolio. In addition to identifying and correcting potentially unhealthy aspects of the programs or control problems before they occur, a well-designed evaluation (health check) can provide significant insights.

Designing a healthy program that evolves to meet changing needs [PDF 423 KB]

Uncovering the full picture of control costs

Costs related to ICOFR may be higher than you realize, in part because they often take a different form than you might expect. When most companies measure ICOFR costs, they typically only look at compliance costs, focusing on testing and external audit expenses. But the larger cost components related to ICOFR draw on other resources throughout the company for tasks. It is important to identify potential savings and find opportunities to add further value.

Uncovering the full picture of control costs [PDF 614 KB]

Outlining a program that meets stakeholder expectations

Too many ICOFR programs obey two simple rules: (1) do the bare minimum to achieve compliance and/or (2) let the external auditor lead the way. But a just-enough-for-compliance approach will miss opportunities to support growth, mitigate risk, reduce costs, and drive value that ICOFR can provide. And the external auditor's priorities may not align with the company's objectives and needs. Whatever approach companies take toward ICOFR, it shouldn't be a passive one. It should be a thoughtful decision based on what key stakeholders expect of the program.

Outlining a program that meets stakeholder expectations [PDF 1 MB]

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