Internal Audits Fix Financial Accounting Problems –

Management Override of Controls –

MANAGEMENT MAY FROM time to time override controls put into place to ensure proper corporate governance. This usually happens with nonrecurring or nonstandard transactions or events. But this in turn leads to an override of established policies and procedures, usually with the intention of enhancing the business’s financial situation. Any such transgressions must be prohibited, unless with the approval of the board of directors, who should be made aware of the potential consequences.

This type of transgression in tax compliance takes place every month in most businesses when secured data is extracted from systems such as SAP or an equivalent Oracle database and dumped into a spreadsheet to manipulate for the purposes of compiling and analyzing data to complete tax returns. The spreadsheets are unsecure, and the propensity for the data to be corrupted is ever present. It is that simple. Extract the financial data from the business SAP system into a spreadsheet that is not tamper proof. If the responsible person did not build the spreadsheet and is working off a previously used template, expect mistakes. Who will ultimately check the accuracy of the information being manipulated in the spreadsheet? Usually no one.

This special report override of controls can be combated through communicating to all concerned that these practices must cease immediately, and resources must be provided for an alternate method.

In accordance with Circular 230 Disclosure