Prepping for Year-End: Internal Control Over Financial Reporting.

• Date: 01 November 2024
• Author: Crawford, Jennifer

The Expert: Jennifer Crawford

As year-end approaches, tax departments can already sense the year-end process looming. With limited time to get year-end financials released while maintaining a robust tax control process, it is critical that the tax department prepares well in advance. We reached out to Jennifer Crawford, director at Baker Tilly, to gain insights into the latest trends and developments related to tax and internal control over financial reporting (ICFR) and how tax departments can prepare for year-end.

Question: Are ICFRs still relevant, and what should we expect from our audit programs?

Answer: ICFRs continue to be a focus area and a source of adverse auditor attestations. However, there are some new trends in the source of those ICFRs. According to Audit Analytics, for FY 2022, information technology, which encompasses information technology, software, and/or security issues, was the number one internal control issue for ICFR, followed by accounting and personnel resources. These trends demonstrate that ICFRs are not usually around the technical concepts; rather, it's often the operational and nontechnical items that result in the highest risk for companies to manage.

The Public Company Accounting Oversight Board (PCAOB), whose objective is to protect investors in public companies, continues to emphasize the need to effectively select and test management review controls, so that is not going away any time soon. In a 2023 Spotlight: Staff report, the PCAOB noted the following focus areas for 2024, which include increasing the number of engagements reviewed, expanding inspection procedures, and performing quality inspections, all which will likely drive increased rigor from your external auditors. We continue to see more requests for support, added management review evidence, and more transparency. They've also emphasized a focus on business combinations, information technology-related matters, [and]...