Maintaining Internal Controls During System Implementations

Maintaining strong internal controls during system implementations is essential to safeguard against risks and ensure a smooth transition. Here are some key strategies to effectively maintain and strengthen internal controls during system implementation in 2025.

1. Plan Early and Involve Key Stakeholders

The success of any system implementation hinges on proper planning. Internal controls should be integrated into the planning phase from the very beginning, with input from all relevant stakeholders—including finance, IT, operations, compliance, and audit teams.

Early planning should involve:

•Identifying critical business processes that will be impacted by the new system and determining which controls need to be maintained or modified.

•Involving internal control experts early in the process to assess the design of the new system and ensure it aligns with existing control frameworks (e.g., COSO or SOX compliance).

•Defining roles and responsibilities to ensure that key personnel are accountable for maintaining controls throughout the implementation process.

This collaboration sets the foundation for a smooth transition while mitigating risks associated with system changes.

2. Conduct a Comprehensive Risk Assessment

Before you begin implementing the new system, it's crucial to perform a thorough risk assessment. Identify potential risks that could affect your internal controls, such as:

•Data integrity issues: The implementation process could lead to data inconsistencies or errors, affecting the accuracy of financial reporting and compliance.

•System access and segregation of duties: Changes to user roles and access controls could create conflicts in responsibilities or unauthorized access.

•Process disruptions: The introduction of new systems might disrupt established workflows and controls if not properly aligned.

Once risks are identified, establish mitigation strategies to address each potential issue. This proactive approach helps prevent control failures during implementation and ensures ongoing compliance with regulations.

3. Maintain Segregation of Duties

One of the fundamental principles of internal control is the segregation of duties (SoD), which ensures that no single individual has control over all aspects of a critical business process. During system implementations, special attention must be paid to SoD to prevent conflicts of interest and reduce the risk of fraud or error.

Key strategies for maintaining SoD during system implementation include:

•Clearly defining roles and responsibilities for system users.

•Restricting system access to ensure that employees can only access the areas of the system necessary for their roles.

•Using automated workflows to enforce checks and balances at various stages of critical processes (e.g., approval workflows for financial transactions).

By preserving SoD during implementation, businesses can mitigate risks related to financial reporting and compliance while maintaining an effective control environment.

4. Test Controls Before, During, and After Implementation

Testing is a vital part of maintaining internal controls during system implementations. Controls should be tested at various stages to ensure they remain intact and effective throughout the process.

•Pre-implementation testing: Before the system is fully implemented, perform testing to ensure that controls within the new system are designed effectively and align with your internal control framework.

•Implementation-phase testing: During the rollout phase, conduct parallel testing (i.e., running both old and new systems simultaneously) to ensure that the new system works as expected without compromising internal controls.

•Post-implementation testing: After the system is live, monitor and test internal controls regularly to ensure that they continue to function properly and that the system is fully integrated with business processes.

Continuous testing throughout the implementation process ensures that any issues with controls can be identified and addressed quickly, reducing the risk of errors and inefficiencies.

5. Maintain Documentation and Audit Trails

Clear documentation is essential for maintaining internal controls, especially during system changes. Properly documenting the entire system implementation process—from planning and risk assessments to testing and post-implementation monitoring—ensures that there is a clear record of decisions and actions taken.

Equally important is maintaining audit trails within the new system. Audit trails are chronological records of system activity that help track changes, monitor access, and identify potential control failures.

Key aspects to consider when maintaining documentation and audit trails include:

•Recording system configurations and changes to ensure transparency and accountability.

•Documenting user access and role changes to track who has access to critical systems and data.

•Ensuring audit trails are tamper-proof and cannot be altered by unauthorized users.

Comprehensive documentation and audit trails provide a reliable reference for internal and external audits, enhancing your business's overall control environment.

6. Provide Employee Training and Ongoing Support

Even the best-designed systems and controls are ineffective without proper user training. During the implementation process, it’s essential to provide training to all employees who will interact with the new system. Training should focus on:

•New policies and procedures related to internal controls.

•How to navigate and use the new system to ensure compliance with established controls.

•Security and fraud prevention practices, including recognizing and reporting suspicious activities.

Additionally, ensure that employees have access to ongoing support as they adapt to the new system. A well-trained team is vital for maintaining the effectiveness of internal controls over the long term.

7. Regularly Review and Update Internal Controls

Once the new system is fully implemented, it's essential to continue monitoring and updating internal controls as needed. This review process should occur regularly to ensure that the system remains effective and aligned with your business needs.

•Perform regular audits: Regular audits help identify any gaps or weaknesses in controls that may arise after implementation.

•Adjust controls as business processes evolve: As your business grows and changes, so too should your internal controls. Be prepared to update controls as necessary to address new risks or changes in regulations.

Ongoing reviews and updates ensure that your internal controls remain robust and capable of managing emerging risks.

Conclusion

Maintaining internal controls during system implementations is critical to safeguarding your business’s financial integrity, operational efficiency, and compliance. By planning early, conducting risk assessments, maintaining segregation of duties, testing controls, and providing proper training, businesses can ensure that their internal controls are preserved and strengthened throughout the implementation process. In 2025, as technology continues to evolve, maintaining effective internal controls will remain an essential practice for ensuring sustainable business success.