Financial controls are a necessary component of running apublic company. Finance staff must use a set of predeterminedcontrols to demonstrate to internal and external auditors that theprocesses associated with generating accurate financial statementsare being performed, and are passing routine testingprocedures.

However, in large organizations, especially those that aregeographically dispersed, the infrastructure of financial controlscan get very complex, very quickly. And when finance managers orauditors take a closer look at the controls framework, they mayfind staff are performing tasks that they call “controls,” but thatare really not much more than busy work. The secret to developing aset of effective and efficient financial controls is to put inplace an assortment of “sanity checks,” through which theorganization constantly re-evaluates why it's taking the actions inthe first place.

In my experience, finance staff often recommend controls thatare easy to pass—such as demonstrating that a report is beingproduced daily—rather than those that could uncover real issuesthat might impact the business's financial statements. The purposeof inserting sanity checks into the controls process is to ensurethat control activities align with the company's operationalobjectives, to avoid the wasteful “check the box” controlsmentality.