Compliance BlackLine

How to Elevate Compliance & Improve Your Control Environment

Sponsored by BlackLine

The biggest challenges accounting and finance professionals are facing in our changing regulatory, controls, compliance, and audit landscape, and how they can effectively adapt to change.


Many startup businesses and more mature mid-sized companies are growing at a fast clip these days, and rapidly entering new global markets and geographies. While internal operations teams focus on maintaining this pace, the finance organization must ensure compliance with disparate and evolving accounting standards and reporting regulations.

It’s a delicate balance to maintain regulatory compliance and not slow down the engine of market expansion—especially as the risks and expectations surrounding audit and controls are shifting. 

As a result, effectively managing internal controls to support financial reporting is now top of mind. Accounting and finance organizations are challenged to operate efficiently and drive strong comprehensive controls amidst the increasing risk.  

Here are some of the biggest challenges accounting and finance professionals are facing in our changing regulatory, controls, compliance, and audit landscape, and how they can effectively adapt to change.

A Growing Regulatory Environment

Globalization, intercompany trade, and mergers and acquisitions have increased the volume of transactions that impact every part of the business, including the close. They’ve also created more risk in downstream financial and regulatory reporting.

The regulatory environment itself has also grown, both in scope and in depth, increasing exposure while placing pressure on precious accounting resources to cover even more bases. 

In a survey conducted by The SOX & Internal Controls Professionals Group, study respondents identified improving the efficiency of the SOX function as a top objective, followed by ensuring compliance with SOX and other regulators, and strengthening organizational relationships across SOX owners.

Material Weaknesses Elevate Fraud Risk

Weak controls can leave an opening for fraud. A 2017 study by the American Accounting Association found that companies with material weaknesses were 80 percent more likely to have future fraud disclosures compared to firms with strong controls.

In fact, when evaluating 127 unique fraud cases, researchers found a strong association between weak entity-level controls and future fraud revelation. They concluded that “the issuance by an auditor of an adverse internal control opinion is a ‘red flag,’ indicating a higher probability that managers are committing (unrevealed) fraud.”

This is forcing accounting and internal audit teams to spend more time re-evaluating risks and their mitigating controls to make sure they are both properly designed and effective.  

Audit Costs Are on the Rise

With regulators’ heightened focus on control testing results, audit costs are also on the rise. In fact, a recent study by Protiviti of nearly 500 companies found that audit costs are larger than ever. Nearly 40 percent of the companies surveyed have seen their external audit fees increase.

In turn, external audit firms are increasing their dedicated resources and depth of engagements—especially as the focus on cybersecurity intensifies and new auditing standards, such as one recently adopted by The Public Company Accounting Oversight Board (PCAOB), demand greater transparency in auditor’s reports.

As a result, accounting teams are becoming more focused on shifting to a self-service model for external audit to minimize time servicing information requests.

Powerful Efficiency Driven by Technology

Technology innovation offers a powerful efficiency, and it challenges the old assumptions that reducing risk requires significant investment, while lean process elevates risk.

Technology like Robotic Process Automation (RPA) can accelerate the close using repeatable rules, scheduling, and processing of accounts and transactions at scale from multiple sources. RPA can dramatically reduce errors in the close and improve balance sheet integrity by strengthening reconciliations.

However, there’s a much larger opportunity: the ability to test greater sample sizes, perhaps even checking every transaction, in detail, while also increasing the overall process efficiency.

Managing Controls for Financial Reporting

Managing internal controls around financial reporting is fundamental to governance and compliance. A recent survey by APQC found that top quartile companies spend 13 cents or less per $1,000 in revenue to operate controls and monitor compliance with internal controls policies and procedures. The bottom performing group spent more than ten times that, around $1.40 per $1,000 in revenue.

To make that a little more tangible, for a $10 billion revenue company, that’s the difference between $1.3 million and $14 million in costs related to controls and compliance. In the context of risk and compliance, these are resources that could be reallocated to managing strategic risk.

More broadly, it’s essential that internal controls and checklists are fully documented and comprehensive. This means that organizations should ensure that they have a real system in place to identify, accumulate, and evaluate control deficiencies, communicate findings, remediate them, and move away from spreadsheet checklists, binders, file shares, or siloed institutional knowledge.

Strengthening Controls With Technology

With modern technology, improving internal controls for financial reporting is one of the lowest hanging fruits to reduce risk and improve efficiency. Underpinnings include using exception analysis and variance reporting to monitor, review, and reconcile financial activity.

Automation can highlight transactions and balances that exceed control thresholds, while ensuring all reports can be reconciled back to the original data.

Workflow can enable strong, auditable sign-offs for reconciliations and other close tasks, while digitization can move checklists from binders, spreadsheets, and tribal knowledge into a managed, version-controlled, centralized store.

Modern cloud applications also open new avenues for auditors who can access reports and underlying transactions from one place, anywhere in the world, with just a web browser—minimizing the need to hunt for data and engage in an ineffective back and forth communication with accounting.

Ultimately, it’s imperative for already resource-strapped organizations to make time to evaluate and implement technology around their close and compliance processes as the demands on these areas are only going to continue to increase in the future.

Join us for Finance Innovation Week, happening Dec. 11-13, to gain a deeper understanding of the industry trends, best practices, and emerging technologies set to transform finance.