Many believe that procedures are the most important method of creating internal control. Then a lot of procedures are written – documenting process after process, whether for processes on the manufacturing floor or in the office (as the Sarbanes-Oxley Act requires for Financial and Accounting processes).
Policies and procedures should provide a guide for meeting organizational objectives and describe the steps that employees are to take when creating a product or delivering a service. This ensures consistency in practice and helps to maintain product quality. It is also very important the employees read the policies, procedures, processes and instruction manuals.
Companies are often confused when we talk about procedures, processes and instruction manuals.
Therefore:
A procedure is a prescribed way of undertaking a process or part of a process. A process is a series of related tasks or activity / methods that together turn inputs into outputs and an instruction manual is a very detailed procedure outlining every detail. There are huge differences between a procedure and an instruction manual.
To make a company less vulnerable to a high employee turnover, instruction manuals should be in place for all tasks performed. An instruction manual is a powerful toll as it makes employees replaceable especially with workers using computers every day. The most important function an instruction manual should secure is that everyone can perform the outcome following the manual step by step.
Internal controls
Internal controls specifically are activities that mitigate or eliminate certain risks or threats while risks refer to the possibility or exposure to a chance of danger, harm, loss or injury. Threats refer to indications of impending danger or harm.
ME CFO can help you set up the internal control framework:
- Control environment — the processes in place to carry out internal controls
- Risk assessment — the process for identifying risks
- Control activities — activities that mitigate risks
- Information and communication — the process of sharing internal and external information
- Monitoring — evaluating the effectiveness of internal controls
At ME CFO, we have done this many times and we can help you too!
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