Management develops and documents policies and procedures for all significant external financial reporting–related control activities. Procedures are documented using various formats, such as narratives, flowcharts, and control matrices. Management develops a standardized format for policies and procedures, which may include:

Greyson Gas, a natural gas utility, uses a standardized template to format its policies. Its loss contingencies policy helps ensure that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles. The policy includes the following sections:

A record of all accounting policy changes, additions, and retirements is maintained, which includes revision number and date, effective date, a brief description of the changes made, and the person who approved the change.

A national trade association establishes a policy that all payments must be appropriately authorized before cash is remitted. It uses an authorization approval matrix for expenditures.

The board of directors reviews and approves the annual budget, over and above the required approval provided by the CEO. Authorization to incur liabilities on behalf of the trade association is limited if they fall outside of the amounts approved in the budgeting process for normal operations. The limits are:

Siobhan O'Reily, the association CEO, must review and approve in writing any capitalized purchases above $10,000. A purchase order must be prepared for all purchases, and every disbursement of funds requires the receipt of an invoice. This policy does not apply to the purchase of association investments, which are authorized by the board of directors through its corporate investment policy.

Ms. O'Reily reviews all purchase orders for more than $10,000 for appropriateness. She compares the amounts to budget, and if she uncovers a discrepancy, she sends the purchase order back for investigation and follow-up.

Good Chip Company, a public company in the US that manufacturers microchips, issues interim and annual financial statements. As part of the entity's policies and procedures relating to its financial reporting process, responsibilities for reviewing the financial statements are established. Abby Champion, chief financial officer, Alex Pender, controller, and the disclosure compliance committee have separate responsibilities for reviewing draft financial statements before issuance.

Mr. Pender is responsible for reviewing initial draft financial statements (initial draft) along with the corporate financial reporting package, which was prepared by Jayden Roberts, director of financial reporting with input from Jack Jones, director of tax. Mr. Pender's responsibilities include:

Ms. Champion is responsible for reviewing the final draft and summary of matters that require resolution. Her responsibilities are:

The disclosure compliance committee comprises the chief operating officer, chief financial officer, chief compliance officer, chief audit executive, vice-president of research and development, vice-president of supply chain, controller, vice-president of tax, and general counsel. The committee members review the final draft. Responsibilities of committee members are:

A large multinational software provider revised its revenue recognition policy due to the risk that lucrative sales commissions have tempted sales personnel to record software orders improperly. Depending on the nature of the software sale, there are different commissions paid to sales personnel. Also, depending on product code, there are different revenue recognition requirements; some products require revenue recognition at the time of sale whereas others require revenue to be recognized over time. Sales personnel occasionally record sales under the wrong product codes, which leads to inappropriate recognition of revenue and sales commissions.

The CEO and CFO approved modifications to the company's revenue recognition policy and related approval matrix that requires all significant software contracts be reviewed by the CFO and other finance personnel before software revenue and sales commissions are recognized. In addition, finance, legal, and sales personnel collaborated in establishing standard contractual terms and conditions that would result in proper recognition of revenue and commissions, and identifying variances from such standards that would require review and approval by the CFO and/or other finance personnel with appropriate technical competencies in applying the company's revenue recognition policy.

In addition, the CFO, sales executives, and legal staff meet annually with sales personnel to review the company's policies, its standard and non-standard contractual terms and conditions, its historical revenue recognition issues, and any specific commercial arrangements to avoid. All subsidiary sales and finance personnel attend annual training that focuses on how to comply with local laws and regulations and with the company's revenue recognition policies and procedures.

The CFO of Boxtop Construction, Suri Navrat, evaluates the process and control activities for assessing cost overruns. She determines that the project manager, George Whitfield, is critical to the process because he is skilled in understanding client needs and project requirements and in analyzing the effects of the alternatives on the project costs and schedule, and, ultimately, the revenues over the project's lifetime.

Mr. Whitfield periodically reviews actual costs incurred for a long-term project, ensuring they are accurate, that indirect costs are appropriately allocated, and that change orders and potential cost overruns do not exceed the authorized funding. If any variances from the cost baseline appear, he promptly investigates them and excludes incorrect or inappropriate changes from the reported cost or resource usage, which is used as the basis for revenue recognition for the period. He also reviews the estimated costs for reasonableness, taking into account the actual stage of construction at the end of the reporting period.

A large for-profit educational institution, Learn Now College, promptly deactivates or removes access rights to the general ledger from employees who no longer require them. Several steps are followed in this process:

As part of the business performance review process, management of White and Stack Co. reviews the results of its business unit, comparing the actual results for the current three-month period with budgets and prior period actual results. The management team observes any significant shortfall in current results compared with the budget, and any existence of performance-based bonus accrual to be paid out when actual performance exceeds budgeted results. Management follows up on the results of its top-level review, identifying any overstatement in bonus accrual. ^{fn 20} Corrective action is taken as necessary by adjusting the amount recorded for bonus payouts.

Business unit or functional leaders deploy control activities in their areas of responsibility by building the policies and procedures into their organization's day-to-day activities. In some cases, a centralized control function or team works with the business unit or functional leaders to help deploy policies and procedures consistently across the organization. The policies and procedures are communicated in various ways, including running training programs, holding meetings, and distributing formal and informal documentation.

A federal agency has identified its most significant financial reporting risk as the misclassification of expenditures as capital or expense. As a result, the agency director has mandated far-reaching organizational changes in procedures and control activities.

Budget formulation and execution processes and structures have been redesigned centrally to identify and distinctly categorize funds for capital projects. These have been distributed to individual departments by the financial planning and budgeting group.

The standard contract has also been modified to require purchased capital items to be separately identified for each project (by budgetary funding code) and to not include items for any other projects.

The agency has instituted new policies, mandatory annual training, weekly reviews of pending contract actions, and monthly reviews of expenditures to ensure program compliance. The efforts have dramatically reduced misclassifications and overcome audit qualifications for plant, property, and equipment reporting.

On a regular basis, or when changes are made to financially significant processes and systems, control activity owners in conjunction with financial reporting and control experts review control activity documentation for continued relevance. Changes are made when redundant, obsolete, or ineffective control activities are found. ^{fn 21}

Central Community Bank maintains a policy checklist on its intranet. The checklist references all the pertinent company policies and management's last review date, next review date, and board of director review and approval as applicable. The policies and procedures are reviewed annually or more frequently if necessary, in response to changes in underlying business processes. The internal audit department assesses compliance with company policy and procedures in conjunction with its internal audit reviews.

Following a finance effectiveness review, Cymbol Creative, a global paper products manufacturer, reduced the number of its business unit accounting groups from six to four, combining accounting for related business operations under one CFO. Following the reorganization, the company reassessed and, in certain instances modified, its control activity policies and procedures to reflect the new organizational structure.