How Your Internal Controls Can Help With Data Security
Many businesses and nonprofit organizations have experienced changes in their operations, policies, procedures, and everything in between since the start of the pandemic. When these areas of your organization evolve, your internal controls have to evolve in tandem to close the gap for new areas of vulnerability. Internal controls are the tools and methods you use to ensure the reliability of your financial data and maintain compliance with federal, state, and local laws and industry-specific guidelines. They help you improve productivity and efficiency, prevent fraud, and improve employee accountability to reduce the margin for human error.
Internal controls also help you ensure the security of your financial and accounting information, employee and client data, and other proprietary and sensitive information. The use of cloud computing has increased, more employees have joined the remote workforce, and many businesses have taken their banking activities, human resources functions, and storefront sales to an online platform. It is imperative to understand how your IT controls and security measures work in order to acknowledge potentially hazardous gaps in your controls.
IT Security Risk Assessments
To uncover areas of risk, your organization should perform internal audits and regular risk assessments in all areas of your business, inside and outside. After you identify the risks, you can alter or implement new internal controls to keep your organization’s data safe.
IT security risks can be physical, technical, procedural, or regulatory in nature. A risk assessment of your physical controls may include security cameras, locks on filing cabinets, alarm systems, and secured doorways. Technical controls cover antivirus software, firewalls, user IDs, passwords, and other forms of user authentication. When looking at procedures, you may address controls such as background checks for personnel, your incident management plan, security training, and data access management. An assessment of regulatory controls helps you determine whether they are helping you meet legal and procedural guidelines and standards of oversight agencies.
Incident Prevention, Detection, and Correction
IT controls are either preventative, detective, or corrective measures. Preventative controls are in place to stop an incident from occurring. For example, providing employees with cybersecurity training or, if a software program contains sensitive information, requiring user identification to gain access are preventative controls. Detective controls help you acknowledge an incident in real-time, such as an automatic alert to an IT specialist when suspicious activity occurs or an alarm system that notifies the police when triggered.
Corrective controls help you restore systems to a secure working state if an incident has already occurred. Even if you have strong security in place, there is always the threat of a data breach, so you need a strategy in place ahead of time for damage control. The Federal Trade Commission has published guidance that should be referenced and followed in the event of a data breach.
Monitoring Compliance & Measuring Effectiveness
Organizations are responsible for ensuring the accuracy of their financial documents, so it is essential to monitor compliance and measure the effectiveness of your internal controls. These measures help you uncover issues related to noncompliance, address flawed data security measures, and close any gaps with new controls.
Using automated rather than manual methods can help you reduce human error and keep your assets less vulnerable. For example, you may have an automated process for deactivating a user’s access to your software programs upon termination. Having a CPA conduct an internal audit gives you a chance to revise an oversight or mistake before being discovered in an external audit.
Contact Livingston & Haynes
L&H’s accounting and attest team performs financial statement audits designed to help privately-held businesses, healthcare providers, and nonprofits manage financial risk, uphold legal compliance, and achieve the level of transparency needed to track and promote scalable business growth.
I work with management teams to ensure the accuracy of their organization’s financial statements and identify risks and vulnerabilities, including those related to data security. Contact me today to discuss your organization’s internal controls and other accounting and attest needs.
by Steven J. Haynes, MBA
Steven Haynes, MBA, is an administrative partner at Livingston & Haynes. Steve’s firm, Emerging Business Partners (EBPI), became an affiliate of L&H in 2007. Steve specializes in bookkeeping, payroll, and business advisory services, including tax, M&A, and funding and equity transactions, for technology, entrepreneurial, and emerging growth firms.