How to Document Internal Controls and Processes
Documenting internal control procedures and processes can be challenging. Complex processes are presented in an easy-to-understand style and that is no simple task. You must have excellent communication skills, both oral and written, to do a good job. The steps to create good documentation involve interviewing employees, observation, evaluation and organization. An important aspect of creating documentation is to allow for modifications later on. Processes change and, as a result, documents must change as well.
The first step to creating documentation is interviewing employees. Do not make assumptions and ask questions to double check your understanding. Ask for employees to show you what they are talking about. If someone needs to approve a paper, ask to see that paper. Some people like to use a tape-recorder and then they transcribe the information. This can be a good idea if someone is talking and showing the process at the same time with lots of details. "Show and tell" is the way to go to get good internal control documentation examples for your business.
Observe your surroundings to get a sense of internal control activities. If the process is to attach invoices to check requests, for example, note if this is being actually done. Many times people tell you the right way of doing a certain process, but that does not mean that it is the way it is being done. Since you are documenting reality, observing the process can be valuable to add good information not obvious during the interview. Look into filing cabinets, and note what papers people have at their desks.
Evaluate the effectiveness of a process while documenting it. If you see processes not working or being performed twice, make a notation of it. This is the best way for you to add value to your work documenting processes. When you evaluate a process, you are looking at it objectively and you can make suggestions for improvements. Make sure follow protocol when making recommendations. Remember, if processes change because of your recommendations, you will need to document the improved processes — not only the old one.
Use Microsoft Word or another program to create your documentation. Consider documentation software specific to your industry that can save you time in writing and organizing. Consider doing both narratives and flowcharts to improve clarity. Avoid using jargon or initials.
Write short sentences and avoid passive voice; do not embellish it or imply judgments. For example, do not write about the nice receptionist. Write about the receptionist. Do not use real names of people — always use position names and keep them consistent throughout the documentation. Have a manager or a supervisor read your documentation to make sure it is correct, and be mindful of confidential information in the documentation. Do not show examples of check signatures or show confidential payroll information.
Be aware of the users of your documentation. They may include not only internal people, but also auditors and other stakeholders. So make sure that your work has no embarrassing grammar or spelling errors.
File documentation in binders and online in folders. Having an internal control narrative template to standardize the documentation helps keep it easy to read. Each binder or folder should have an index with the information contained within. For example, you could have a binder about Accounts Payable where you could file narratives and flowcharts documenting the process. You may have another binder about Payroll and yet another about Accounts Receivable.
Separating the documentation by process can help users in finding information. Have the same organizational format for each binders. This is very important when changes need to be made and a specific item needs to be found quickly.