Internal Controls Guide

Operating managers, in tandem with accountants, consultants, and IT specialists, are constantly faced with the task of designing internal controls. Then, these same individuals, as well as independent external auditors and internal auditors, must evaluate existing systems of control, including recommending and implementing changes to existing control systems. This third edition of Internal Controls Guide (previously published as Handbook of Internal Accounting Controls) is written for CPAs, internal auditors, system designers, controllers, operating managers, small business owners, not-for-profit administrators, consultants, and directors. Following the passage of the Sarbanes-Oxley Act in 2002, managers are required to make representations regarding their controls and CPAs are required to perform a related attestation service. The Public Company Accounting Oversight Board (PCAOB) issued Auditing Standard No. 2, “An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements,” in June 2004, requiring accelerated public company filers (those seasoned companies with public float exceeding $75 million) to comply with internal control reporting and disclosure requirements for fiscal years ending on or after November 15, 2004. Other public companies, including smaller companies, foreign private issuers, and those entities only issuing registered debt securities, must comply for fiscal years ending July 15, 2005. This book provides a roadmap for effective and efficient planning for control documentation, monitoring, and follow-up activities. The requirements of Auditing Standard No. 2 are reflected in forms, checklists, and efficiency suggestions throughout the book. Guidance still applicable to nonpublic entities is similarly addressed. This Guide describes in practical terms the critical elements of internal control then, step-by-step, demonstrates how to evaluate and improve these elements for each of the major operating cycles of a business.

Wanda A. Wallace, Ph.D., CPA, CMA, CIA is the John N. Dalton Professor of Business Administration, Emerita, at the College of William and Mary in Williamsburg, Virginia. Dr. Wallace was selected as the recipient of the Association of Government Accountants’ (AGA’s) 2002 Cornelius Tierney/Ernst &Young Research Award in recognition of her outstanding research accomplishments over her career. Dr. Wallace joined the Financial Accounting Standards Advisory Council (FASAC) that advises the Financial Accounting Standards Board (FASB) in 1991 and served through 1995. Dr. Wallace served on the Government Auditing Standards Advisory Council from 1991 through 1996. She consults with national and international firms, ensuring up-to-date appreciation of current practice problems. Dr. Wallace has authored over 40 books and monographs, including Mastery of the Financial Accounting Research System (FARS) Through Cases; Performance Measurement and Risk Monitoring; and Pro Forma Before and After the SEC’s Warning A Quantification of Reporting Variances from GAAP. In addition, she has authored over 200 articles in journals such as the Harvard Business Review, European Management Journal, Accounting Review, and Journal of Accounting Research. Dr. Wallace also has served on the editorial boards of numerous national and/or international journals, including the British Accounting Review, Accounting and Business Research, and Journal of Accounting and Public Policy.