The AICPA and accounting profession have been emphasizing the benefits and need for risk assessment at all entities for many years. For most small businesses, these standards have been a challenge to implement. While many businesses may feel they don’t have the resources or the need to implement these practices, they can be extremely beneficial and very easy to implement with some minor changes to their every day practices.
I took a class once where they explained that it may be a change in the way we look at things that allows us to implement these standards. At some level, we all do a risk assessment, on a routine basis. For example, I don’t post pictures of my credit card on social media. While this seems obvious, the reason is ultimately that I deemed this practice to be putting myself at risk for misappropriation of my assets. That’s risk assessment. And it can vary from person to person, situation to situation. Maybe I don’t believe it’s too high of a risk to give my card to my husband, but I do feel it’s too high of a risk to give that card to my teenage daughter. I have never written this thought process down, but innately, I have identified where in my life I feel my risks lie.
This same process can be applied at any business, regardless of its complexities or lack thereof. Any business owner could sit down on an annual basis and try to brainstorm the areas of their business that may have a higher risk than others. Maybe you sell something of such high value that your inventory is an obvious risk of theft. If that’s true, I would bet you have some controls in place to ensure that your inventory is not stolen. That’s your internal control. If you don’t have any way to prevent it, then we would consider that area a high risk and would work to develop some ways to better protect that inventory.
Having this discussion with your CPA can be invaluable. A good CPA should be well positioned to help you not only identify these control risks, but to help you develop workable solutions to help mitigate these risks. Business owners that are able to come to a CPA with some idea of where their risks are can get much more value out of this discussion than someone that has never gone through this thought process. While CPA’s can be great, we will never know your business as intimately as you do. Your roadmap can help us get to the issues that are most important and valuable to you, and ensure that we can best assist you with any problems that may exist.
If you have any questions on the above or would like to consult with one of our professionals about your specific situation, please contact us at firstname.lastname@example.org or 303-792-3020.