The Five Whys technique is a simple and powerful problem-solving strategy that involves asking repeated “why” questions to identify the root cause of a problem. In this post, we will use the Five Whys technique to solve internal control problems in a company.
This technique (or tool) can be applied to a wide variety of problems and situations and can be an excellent tool for companies to improve their efficiency and productivity.
Identifying the root cause of an internal control problem in a company
To exemplify how the Five Whys technique can be applied, let’s use it to identify the root cause of a possible internal control problem in a company.
The problem: there is a pattern of accounting errors in a specific department of the company.
1) Why are there recurring accounting problems in a specific department? Answer: Because the account reconciliation process is not being followed properly.
2) Why is the reconciliation process not being followed properly? Answer: Because the employees responsible for the process do not fully understand the guidelines and procedures.
3) Why do these employees not fully understand the guidelines and procedures? Answer: Because there has been inadequate training or regular updates on accounting guidelines and procedures.
4) Why has there been inadequate training or regular updates on accounting guidelines and procedures? Answer: Because the team responsible for training and updating accounting guidelines and procedures is overloaded with other tasks and does not have enough time to dedicate to training.
5) Why is the responsible team overloaded? Answer: Because there are not enough people to perform the necessary tasks, and the company is not willing to hire more employees.
Proposed solutions based on the answers obtained
Based on these answers, the company could adopt the following measures:
- Review and improve the accounting reconciliation process to make it clearer and easier to follow.
- Offer regular training to employees responsible for the accounting reconciliation process.
- Hire more employees to assist with accounting tasks and reduce the training team’s workload.
- Review the task management process to ensure that the training team has enough time to dedicate to training.
The Five Whys technique can be a useful tool for companies to identify the root causes of problems and adopt measures to correct them. In this specific case, the technique helped identify the lack of training and personnel as the main causes of recurring accounting problems in a department.
Now, the company can implement the proposed solutions and improve its internal controls.
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