Internal Control Evaluation

🔒 CONTROL TESTING: Turning Assumptions into Evidence Designing internal controls is essential—but proving they work is where real assurance lies. Control testing is the bridge between theory and reality, showing whether detective, preventive, and corrective measures actually protect your organization. 1️⃣ Why it Matters • Detective controls (e.g., reconciliations) must flag anomalies. • Preventive controls (e.g., approvals) should stop errors before they occur. • Corrective controls (e.g., backups) need to restore operations swiftly. If these fail under scrutiny, risk hides in plain sight. 2️⃣ Essential Control Testing Cycle 1. Define Control Objective – What risk does the control tackle? 2. Test Design – Does the control, in theory, cover the risk? 3. Test Operating Effectiveness – Does it work in real life? Sample transactions, observe processes, interview owners. 4. Document Results – Evidence speaks louder than opinions. 5. Report & Remediate – Highlight gaps, assign fixes, and track closure. 6. Retest & Improve – Controls evolve as processes and threats change. 3️⃣ Real-World Example Imagine a monthly vendor payment review meant to prevent duplicate payments. Testing uncovers that the reviewer only checks high-value invoices, leaving small duplicates undetected. Insight gained? Adjust the review scope and automate a report for all invoices. 4️⃣ Tips for Effective Testing • Risk-Based Prioritization: Focus on controls guarding material risks first. • Cross-Functional Teams: Auditors, process owners, and IT build a fuller picture. • Continuous Testing: Embed into workflows—don’t wait for year-end audits. Remember: good controls are useless if unproven. Test them early, test them often, and turn risk management into actionable evidence. 🔖 #ControlTesting #InternalControls #RiskManagement #Audit #GRC #Compliance #OperationalRisk #ProcessImprovement #Governance #Assurance #ISO31000 #SOX

Just because it looks good on paper doesn’t mean it works in practice. Ever seen a control that looks great on paper but fails in real life? That’s exactly why we document both design and operating effectiveness. This concept changed the way I approach every audit. Let me break it down. Every control exists to address a risk. That’s its core job. So as auditors, our responsibility is to evaluate: 1. Is the control designed well enough to address the risk? 2. Is it actually working in practice? Let’s take both parts one by one: 1. Design Effectiveness This answers the question: Does the control make sense on paper? - You review how the control is structured. - You assess if the steps align with the risk it’s meant to address. - You typically use one instance to understand how it’s expected to operate. If it looks solid in theory, you move to the next phase. 2. Operating Effectiveness Now we ask: Does it actually work over time? This is where theory meets reality. - You select a sample from a defined audit period (e.g. 5–7 months). - You check if the control followed the process consistently across those instances. - If even one key step fails repeatedly - you’ve got a problem. Think of it like this: Your college syllabus (design) might look great. But if the course doesn’t actually help you apply it in real life (operation), was it effective? Same with controls. Key Insight: - Design effectiveness = one point in time - Operating effectiveness = across a period of time If you’re testing a change management control: - For design, test one change per change type to see if the process makes sense. - For operating effectiveness, test a sample of multiple changes over months to check consistency. A control isn’t strong just because it’s designed well. It’s strong when it works repeatedly. What’s been the toughest control you’ve evaluated for operating effectiveness? #itaudit #cisa #crisc #audit

Control testing evaluates how well a control is working. But what if the control itself is flawed by design? That’s where Control Design Assessment comes in, it ensures the control is logically sound, appropriately mapped to risks, and capable of preventing or detecting the risk it's meant to address. Without a proper design, even the most rigorously tested control might still fail in practice. Test the blueprint before the building. A well-designed control sets the foundation for effective and meaningful testing. Anup Singh, CISA® #RiskManagement #Controls #InternalControls #Governance #OperationalRisk #ControlTesting #ControlDesign #Compliance #LinkedIn LinkedIn LinkedIn Guide to Creating

Day 21 of 30: How to Conduct a Simple Risk and Control Self-Assessment (RCSA) A lot has been said about internal controls in the past 20 days. Today, I want to speak briefly about how to conduct a simple risk and control self assessment. Risk and Control Self-Assessment (RCSA) is a structured internal process through which an organization’s business units identify, assess, and document key operational risks and controls within their activities. RCSA is typically conducted by the process owners themselves, hence “self-assessment” tool for strengthening risk management and internal control. It doesn't have to be a lengthy or intimidating process. In fact, some of the most effective assessments are simple, focused, and collaborative. Here’s how to run one in your team without needing a complex system or external consultants: Step-by-Step Guide to a Simple RCSA ✅ 1. Identify your key processes What does your team do daily that affects operations, money, data, or compliance? Focus on core processes like approvals, inventory handling, reporting, etc.   ✅ 2. Spot the risks You identify most risks by asking “What could go wrong in this process”? Think in terms of errors, fraud, delays, miscommunication, or system failure. In procurement for instance, a key risk could be ordering without proper approval.   ✅ 3. Map existing controls Clearly identify the controls that already exist in the system. What is already in place to prevent or detect the identified risks? Document policies, system controls, checks, reconciliations, or supervisory reviews.   ✅ 4. Assess effectiveness Are the controls working? Are there gaps? Are they being bypassed? You can use a simple rating scale (e.g., Effective / Needs Improvement / Not in Place) for proper assessment.   ✅ 5. Define Action Steps Where gaps exist, identify practical actions — such as training, system tweaks, or new checks.   Bottom Line: Keep in mind that the session need to be interactive and blame-free. Also, real life examples enhances team members’ quick connection to the process. Furthermore, there should be proper documentation and regular revisiting of controls because controls are only as good as they are updated. “RCSA is not just a compliance checkbox but a proactive culture of accountability.” It is about empowering your team to own their risks and controls. Start small, stay consistent. #Day21 #InternalControlChallenge #RCSA #RiskManagement #InternalAudit #Governance #ControlsThatWork #AuditReady