After recovering from some hand surgery, I am now able to restart my blog postings. Sorry for the short sabbatical.

As the calendar year is rapidly coming to a close, this means that the annual closing and audit process is once again starting to get on our minds. And regardless of whether or not you have to contend with SOX compliance issues, we all want to reduce the risk of control failure in our routine closing processes and in our internal controls over financial reporting.

The monthly (and annual) close process is a critical part of an organization’s internal controls. How well that close process is managed has a direct impact on timely decision-making during the normal course of business and on the level of reporting risks the CFO and controller have to consider. It is not unusual that close processes and account reconciliation management are manually intensive, time-consuming, and error prone. The term “hodgepodge” often comes to mind when talking about the close process. more

Small public companies, also known as “non-accelerated filers,” have been facing for a long time the costs of compliance with Sarbanes-Oxley (SOX) Section 404(b)’s requirement for the external auditor to report on the adequacy of the company’s internal control over financial reporting. Over a year ago, in June 2008, the SEC announced that the 404(b) requirement for small companies was being extended to fiscal years ending on or after Dec. 15, 2009, as a cost-benefit study of compliance costs for small businesses was completed.

In case you missed it … on October 2, 2009, the SEC once again delayed the timing for compliance with 404(b). This time, the delay is only for nine months. And it sounds like this time the SEC means for this to be the last delay. more

Over the last 10 to 15 years, the degree of automation in financial processes has advanced dramatically. And while most companies continue to strive to develop and implement even more automation into their transaction processing and financial closing and reporting processes, there is little doubt that the manual journal entry is going to continue to be a key component in the financial closing and reporting process for the foreseeable future.

This statement is based on my own admittedly non-cientific survey of leading financial personnel who are in my professional network. These people have roles such as CFO, chief internal audit executive, deputy comptroller, SOX team leader, and even partner with a national CPA firm. They work in a wide variety of industries, including manufacturing, medical products and services, telecommunications, state government, and energy, in addition to public accounting.

Since I am working on an article about risk and the manual journal entry process, I have been holding various types of discussions (phone and e-mail) with these outstanding accountants and financial professionals. One of them brought up an intriguing thought about the future importance of the manual journal entry process, given pending changes in accounting standards. more

Accountants have wrestled with the question of materiality forever and often have used a “5 percent rule” when it comes to determining materiality. In short, the theory behind this “5 percent rule” is that investors would not be unduly influenced by variances in net income or income statement line items that are under 5 percent. Most would agree that determining materiality it not a cut-and-dried deal.

This “5 percent rule” of materiality most often is applied to financial statement representations and disclosures. But there are plenty of business events where materiality matters. And when it relates to fraud, “what does it really mean?” more

Business process problems happen in all sorts of environments. While most of my career has been spent working in industrial companies, I have recently started to take a look at what goes on in not-for-profits and the academic world. Financial and executive management in all worlds share many of the same challenges and in the vast majority of circumstances are working diligently to do a good job. Unfortunately, I also have learned that just as in the industrial world, there is some bad news about academic business processes to be shared. more