8/15/2023 0 Comments Budgeting and forecasting process![]() ![]() Creating a model that will project a complete and accurate balance sheet is not a trivial task. Since I knew the real reason from experiencing the same phenomenon in other organizations I accepted his response.Īnyone who works in the administration of large enterprise financial management software knows how difficult and costly it is to properly implement and maintain the software across a large organization. When I asked one of the finance managers why they were not budgeting the balance sheet his response was: “we never do that”. There was only an income statement, by region, by operating division and by business unit and product line. To my surprise, the first time I worked on this engagement, there was no budget of the corporation’s balance sheet. As is common with very large organizations, this company’s budget consisted of a compilation of many worksheets prepared and submitted by regional divisions and operating units, and entry into the corporate finance management software. One of the activities I am always involved in when testing controls over the annual budget includes reviewing the budget itself. The annual budget internal controls usually are concerned with the existence of an annual plan, its review and approval by management and the review and approval of changes to the budget throughout the process. Although these controls do not directly affect financial statements, evidence of their performance is an indication of effective finance policies, attention to detail and management’s commitment to execute its entity level controls. ![]() This is an engagement designed to assist management in their assessment of design and effectiveness of various internal controls over financial reporting, mandated by the Sarbanes-Oxley Act of 2002 for most publicly traded companies.Īmong the many functions in accounting, finance and operations, this company had a small set of controls surrounding the area of budgeting and forecasting. I just finished my portion of work in a recurring, annual audit and certification of internal control over financial reporting in a large, publicly held manufacturing company. ![]() Why having internal control over the budget process does not automatically mean it is done correctly. ![]()
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