Compensating controls for small finance teams
- Practitioners recommended compensating controls where one person handles deposits, payments, payroll and reconciliations. - The approach centers on a documented 'second look' review step and segregation of duties mitigations in small teams. - Adding a second‑look process and video explainers helps detect errors early and prevents single‑person control failures from escalating (x.com/AdamSte43009723/status/2047102534662205778) (x.com/kdbowyerCPA/status/2047045202188136686).
Small finance teams are formalizing a “second look” when one employee handles deposits, payments, payroll and reconciliations. (warrenaverett.com) The core problem is segregation of duties: one person should not control a transaction from start to finish without oversight. In many small businesses, the same employee still receives payments, records them, makes deposits and helps close the books because there are not enough staff to split every step. (coso.org) (warrenaverett.com) Practitioners are filling that gap with compensating controls, which keep the work with one person but add a documented review by an owner, manager or outside accountant. Warren Averett’s February 17, 2026 guide lists examples: matching deposit reports to bank activity, approving a new vendor before the first payment, reviewing the payroll register before payroll runs, and scanning the bank statement before a reconciliation is finalized. (warrenaverett.com) State and professional guidance has moved in the same direction. The Washington State Auditor updated its segregation-of-duties guide on March 17, 2026, and AICPA & CIMA published a September 4, 2025 reference chart for smaller nonprofits with four people. (sao.wa.gov) (aicpa-cima.com) The push comes as accountants keep pointing to small control failures that grow quietly. A February 11, 2026 Journal of Accountancy podcast on embezzlement cases said weak segregation of duties and role consolidation let schemes persist for years, especially when month-end pressure weakens review. (journalofaccountancy.com) For a two- or three-person finance function, the practical change is not a new software stack or a new hire. It is a repeatable checkpoint with evidence: a signed report, an approval in the accounting system, or a short video walkthrough explaining what was reviewed and what exception was cleared. (warrenaverett.com) (sao.wa.gov) That paper trail matters because internal control frameworks treat controls as operating routines, not one-time policies. COSO says effective internal controls help organizations pursue objectives with confidence and integrity, and small entities are increasingly adapting that principle to lean teams instead of waiting for perfect staffing. (coso.org) (aicpa-cima.com) The result is a modest shift in how small finance shops defend themselves: if one person still has to do the work, someone else has to prove they looked. (warrenaverett.com) (journalofaccountancy.com)
