Financial Controls vs. Audited Financials

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Can you imagine how heartbroken and violated you will you would feel if you found out that one of your longtime trusted employees was embezzling from you?

Hi this is Judi Otton with GrowthCast, and in the past week I’ve read three articles about employees embezzling from their companies, and from the work I do I know that’s just the tip of the iceberg. Most companies don’t go public with this information.

I posted on LinkedIn (https://bit.ly/3xiTkEt) a few tips for financial controls that you can implement in your business. But I want to talk about the difference between audited financials and financial controls.

Many companies have audited or reviewed financials done annually. This is not a substitute for appropriate financial controls and let me tell you why.

First of all, what are audited financials? They are financials reviewed by an independent outside firm that ensures that they are in compliance with generally accepted accounting principles or GAAP. And these auditors will look at a sampling of transactions – invoices, POs, bills, etc. Financial controls however are processes that you put in place to control your financial resources and to prevent embezzlement. But the key is that most embezzlement is performed by longtime trusted employees in finance. They’re also likely the person that’s providing information to the auditors for your audited financials or reviewed financials. So they can provide financials they can provide transactions that don’t raise any red flags without anyone knowing the difference. So make sure that you’re looking at both of these things.

Yes, you need audited financials but you also need a full set of financial controls. If you have any questions about this please reach out I’m happy to have a conversation about this any time. This is Judi Otton with GrowthCast and I’ll be back next week with your Fiscal Fitness Tip of the Week

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