When to Eliminate Controls in .NET

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When to Eliminate Controls
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Despite the lengthy list of controls noted in the last section, there are times when one can safely take controls away By doing so, one can frequently eliminate extra clerical costs or at least streamline the various accounting processes To see if a control is eligible for removal, the following steps should be used: 1 Flowchart the process The first step is to create a picture of every step in the entire process in which a control fits by creating a flowchart This is needed in order to determine where other controls are located in the process flow With a knowledge of redundant control points or evidence that there are no other controls available, one can then make a rational decision regarding the need for a specific control 2 Determine the cost of a control point Having used a flowchart to find controls that may no longer be needed, we must then determine their cost This can be a complex calculation, for it may not just involve a certain amount of labor, material, or overhead costs that will be reduced It is also possible that the control is situated in the midst of a bottleneck operation, so that the presence of the control is directly decreasing the capacity of the process, thereby resulting in reduced profits In this instance, the incremental drop in profits must be added to the incremental cost of operating the control in order to determine its total cost 3 Determine the criticality of the control If a control point is merely a supporting one that backs up another control, then taking it away may not have a significant impact on the ability of the company to retain control over its assets However, if its removal can only be counteracted by a number of weaker controls, it may be better to keep it in operation
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48 / Accounting for Payroll
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4 Calculate the control s cost/benefit The preceding two points can be compared to see if a control point s cost is outweighed by its criticality, or if the current mix of controls will allow it to be eliminated with no significant change in risk, while stopping the incurrence of its cost 5 Verify the use of controls targeted for elimination Even when there is a clearcut case for the elimination of a control point, it is useful to notify everyone who is involved with the process in which it is imbedded, in order to ascertain if there is some other use for which it is being used For example, a control that measures the cycle time of a manufacturing machine may no longer be needed as a control point, but may be an excellent source of information for someone who is tracking the percentage utilization of the equipment In these cases, it is best to determine the value of the control to the alternate user of the control before eliminating it It may be necessary to work around the alternate use before the control point can be removed This control evaluation process should be repeated whenever there is a significant change to a process flow Even if there has not been a clear change for some time, it is likely that a large number of small changes have been made to a process, whose cumulative impact will necessitate a controls review The period of time between these reviews will vary by industry, since some have seen little process change in many years, while others are constantly shifting their business models, which inherently requires changes to their supporting processes If there are any significant changes to a business model, such as the addition of any kind of technology, different types of employment models, the addition of new company locations, or a shift to outsourcing or contracting out various types of labor, a complete review of all associated process flows should be conducted both prior to and immediately after the changes, so that unneeded controls can be promptly removed or weak controls enhanced
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Procedures and controls are critical components of the payroll process Procedures are designed to increase the efficiency of the department by standardizing work steps, while controls can have the opposite effect by increasing the number of tasks in the procedures in order to ensure that there is no loss of assets The payroll manager must reconcile the conflicting goals of procedures and controls efficiency versus asset control by balancing the need for additional streamlining with any resultant loss of control There is no perfect solution to this balancing act, since it will be based on the number of company locations, the skill level of the staff, the department s organizational structure, and other intangible factors Also, once the payroll manager strikes a balance between the efficiency and control objectives, this issue must be revisited time and again, since the manner in which the payroll department operates will change over time; these changes must be incorporated into procedures and evaluated in terms of their impact on the control environment
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