Internal Controls

How Has Your Control Environment Been Impacted by the Pandemic?

As the world continues to battle the novel coronavirus (COVID-19) outbreak and we all do our part to help flatten the curve, individuals and companies alike are taking steps to navigate this public health crisis.

Organizational Impact
Like many organizations, the top priority is the safety and well-being of people, clients, customers, families, and the communities in which we live and work. To respond — and recover — from a crisis, companies and their boards must work quickly to minimize business interruption, maximize operational efficiencies, and assess cash flow and liquidity concerns. These assessments can lead to hard and life-changing decisions for their employees that are not taken lightly yet have a lasting impact.

Internal Controls Over Financial Reporting (ICFR) Impact
Current uncertainty continues to evolve, making it difficult for organizations to evaluate the impact on their control environments. As companies move to remote operations, or need to modify their workforce, an assessment over the control environment is required to determine if it is operating as it had been prior to the rapid changes. These changes can impact the overall control environment including the design and operation of controls. The question organizations should be asking themselves is How has your control environment been impacted?

FACTOR ACTION SOLUTION
  • Remote working/layoffs/hiring/furloughs
  • Employees performing ‘other duties’ outside of their skill set
  • Business unit/department reduction/slow-down/closure/expansion or growth
  • Cross training of employees to cover reduction or increase in employees’ tasks
  • Train new employees who are not fully knowledgeable of the position
  • Re-organization of business unit/department structure
  • Evidence of control performance (analysis/review) changes
  • Control failure in design/operating effectiveness
  • Segregation of Duties Assessment & User provisioning and deprovisioning
  • Restructuring/Turnaround
  • Business Performance Improvement
  • Outsourced Human Capital Management
  • Risk and Control Matrix design assessment
  • Implementation of new controls
  • Documentation standards
  • Growth or loss of revenue/customers
  • In-scope processes, locations, or materiality due to financial results
  • Net operating loss (NOL) carryback/forward
  • Possible liquidity issues
  • Asset impairment or valuation concerns
  • Risk Assessment and Scoping update
  • Implementation of new controls
  • Tax Assessment and implications
  • Liquidity/cash flow management
  • Data Security
  • Infrastructure does not have sufficient security for increased remote access
  • Cybersecurity Assessment
  • Implementation of new controls
  • Federal financial assistance
  • Compliance with regulations and guidelines for using the financial assistance
  • Control gap in design
  • CARES Act funding
  • Risk and Control Matrix design assessment
  • Implementation of new controls
  • Paycheck protection plan/payroll tax credits
  • Implement new compliance processes, monitoring and controls

The Plan: A Phased Approach

If COVID-19 has impacted your control environment, consider taking the following approach to review, evaluate, and respond to the changes in your ICFR:

Phased-Approach

To read more about these phases and the steps your organization can take to effectively evolve its control environment during and beyond the pandemic, download our whitepaper: Evolution of Your Control Environment During a Pandemic.

Download Whitepaper: Control Environments During a Pandemic

Michelle Mackey
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