In any organization, internal controls strengthen governance, reduce errors, safeguard assets, and improve operational efficiency; however, some controls are designed more effectively than others. Automated controls are designed to operate consistently over time, regardless of the volume of data involved, and without relying on human intervention. Automated internal controls embed checks, balances, monitoring, and enforcement directly into systems and workflows without manual intervention. In this article, we’ll define automated internal controls, identify how these differ from manual controls, and provide a variety of examples. We will also discuss the benefits and challenges of automating internal controls for a better understanding of the full potential of this type of control.
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What are automated internal controls?
To begin, let’s define internal controls in general, then move into automation. Internal controls are implemented by an organization to help ensure that:
- Operations are effective and efficient
- Financial and other reports are accurate, reliable, and timely
- The organization complies with laws, regulations, and internal policies
The controls are intended to address and mitigate risks, including those related to errors, fraud, misstatements, and non-compliance. However, as Deloitte points out, “Existing controls environments are often overly complicated, inefficient, reactive, and rigid.” So many organizations are looking for ways to automate their control processes.
An automated control is executed by technology, such as applications and systems, and often incorporates embedded rules, algorithms, and logic. These controls are typically described as either fully automated, meaning little to no human involvement, or partially automated, where an element of manual input is still necessary. While manual controls depend on human effort for execution, automated internal controls rely on programmed logic, system workflows, alerts, validations, and system-enforced policies to perform the control.
An effective control environment will include both manual and automated controls, but with so much activity occurring in every organization, we need to design the control environment so that more of the controls are automated rather than requiring manual involvement. This approach ensures consistency, speed, traceability, and a lower risk of human error. Combining with automation involves embedding internal control functions directly into the technology stack. This allows many preventive control activities to occur automatically as part of a system operation, rather than relying on manual, detective checks performed by busy individuals.Manual vs. automated internal controls: Key differences
When evaluating control automation, it’s important to understand the key distinctions between manual and automated controls. In certain scenarios, particularly those requiring a high level of judgment, a manual control may be more appropriate than an automated control. The table below outlines several core design features that differentiate manual controls from automated internal controls.
| Feature | Manual controls | Automated internal controls |
| Execution | Includes approvals, reviews, sign-offs, reconciliation, and inspections performed by individuals. | Includes workflows, system validations, automated matching, and real-time alerts performed by systems and applications. |
| Consistency and reliability | Susceptible to human error, missed oversight, and processing delays. | Operations run continuously with high reliability and minimal variation, assuming the logic is correct. |
| Timeliness | Often slower, with a delay between when an issue arises and when it’s detected. | Monitoring and detection occur in real-time or near-real-time. |
| Scalability | Limited scalability due to the increased effort required with higher transaction volume. | Scales seamlessly since repetitive automation tasks remain unaffected by volume growth. |
| Judgement and discretion | Supports decisions that require human judgment, nuance, and contextual understanding. | For tasks that rely on human judgment, automation is limited. Exceptions and edge cases must be addressed manually. |
| Cost and resources | Becomes increasingly resource-demanding as volume and complexity grow, requiring more personnel, time, and effort. | Requires a higher upfront investment for technology integration, but significantly reduces ongoing human resource demands. |
| Auditability/ Traceability | Relies on manual documentation, which may be incomplete or misaligned with the actual operations. | Automated logging and time-stamping enhance traceability and support robust auditing. |
| Risk of fraud/ Override | Increased exposure to override attempts, collusive behavior, and human error. | Risk is reduced in some areas due to system-enforced controls and audit trails, but users with elevated access, such as administrators, can still alter configurations. |
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It is important to note that manual controls still have their place, especially for activities where human judgment, flexibility, ethical considerations, or non-routine transactions are involved. However, many control objectives, especially those that are routine, repetitive, high-volume, or highly rule-based, are prime candidates for automation.
Examples of controls and automation
To illustrate this further, we can examine examples of both manual and automated internal controls. In all examples, both the manual and automated controls are acceptable. APQC has noted that “organizations operating at the median level have automated roughly 25% of their primary controls,” with top performers reaching around 40% automation. The automated controls are generally preferred since these are less prone to human error and for the other reasons previously identified above.
Expense report workflow
Manual control: An individual prepares a manual expense report with copies of receipts for a reviewer. The review then compares the requested reimbursement to the receipts and decides if the expense is appropriate based on a policy. If more information is needed, they reach out to the requester. Once completed, the review is emailed to the accounting department for processing.
Automated control: When someone submits an expense report, the system routes it automatically based on predefined rules. If certain criteria are met, the expense is automatically approved or denied. If the controls automation rules are not met, the system routes the expense report to the designated individual for review. The reviewer chooses to approve or reject the expense, and the system automation resumes to complete the reimbursement.
Access deprovisioning
Manual control: Access to organizational systems must be revoked when an employee departs or is terminated. Human Resources initiates notifications to designated system owners, who are responsible for logging into each relevant system to revoke access.
Automated control: When an employee is flagged in the Human Resources application, it initiates an automated workflow in the identity management system that promptly revokes the individual’s access to all applications.
Administrative action monitoring
Manual control: Each quarter, a log of all system administrator transactions is reviewed to verify their appropriateness. Each transaction is cross-referenced with the ticketing system to confirm the initial request, evidence of user acceptance testing, and the necessary approvals.
Automated control: Real-time monitoring, all actions performed by system administrators are continuously monitored. System rules are in place to prevent conflicting access, such as a user having the ability to both create purchase orders and approve payments, or to trigger alerts when these rules are violated. If an administrator makes an unexpected change directly within a target application, the monitoring system immediately sends an alert to the IT Security team, who then assess whether the transaction is appropriate.
Throughout each of these examples, automated internal controls may require more effort to design and implement. However, once operational, they deliver more consistent outcomes, are easily scalable, and ultimately enhance effectiveness and efficiency.
Implementing automated controls: Challenges and considerations
While automating internal controls offers numerous benefits, it also presents challenges and trade-offs. Organizations must carefully consider several factors before pursuing automation initiatives.
Controls automation: Challenges
One of the primary challenges of automating internal controls is the significant up-front investment of time and resources. Deploying systems, defining control logic, mapping existing processes with technology, and configuring workflows can be expensive and complex. Additionally, not all teams possess the necessary skillsets to execute these tasks effectively. The reliability of automated controls depends heavily on the quality of the underlying rules, logic, and data sources. Poorly designed logic, incomplete requirements, or outdated thresholds can result in false positives or negatives, control gaps, and system errors.
Another common challenge is data quality. If the source data is incomplete, inaccurate, or delayed, automated internal controls may produce incorrect outcomes or generate excessive false alerts, resulting in alert fatigue. Additionally, some organizations experience challenges accessing data when it is restricted due to privacy and compliance requirements.
Transitioning from manual to automated controls often presents challenges to change management and organizational culture. Successful implementation requires stakeholder buy-in, comprehensive training, and alignment across assurance functions such as compliance, audit, and risk management. It may also involve redefining roles and responsibilities. Initial resistance is common and often stems from a lack of understanding; if not addressed, this resistance can hinder the effectiveness of the automation efforts.
Not all controls are suitable for automation. Some require human judgment to interpret policies or manage unique scenarios. A common challenge that can arise post-implementation is realizing that certain controls need to be supplemented with manual or semi-automated processes to manage exceptions, rare cases, or nuanced decisions. Effective control design requires acknowledging these scenarios and striking the right balance between automation and control effectiveness.
Controls automation: Best practice considerations
Understanding the major challenges upfront allows organizations to proactively address them by applying best practices. For teams new to controls automation, it’s advisable to start small and pilot one or two controls or processes. This approach helps validate assumptions, resolve issues, and thoroughly test the setup to ensure the outcomes align with expectations.
Even during the pilot phase, it’s essential to involve stakeholders across departments. Assurance partners, including risk, compliance, and internal audit, will need to adjust their control testing approaches. While teams in operations, finance, and IT may need to revise internal processes and documentation to ensure control objectives are clearly defined and individual roles are well understood.
As you navigate various control and automation strategies, it’s essential to ensure the availability of high-quality and reliable data. Automated internal controls rely heavily on data that is accurate, complete, and timely to function effectively.
Automated controls must be regularly updated to remain effective as business processes, regulatory requirements, or risks evolve. To manage these changes properly, organizations should maintain version control and implement structured change management procedures. This includes thorough testing and formal approval of any updates to the control logic.
Maintaining thorough documentation is essential to ensure a robust audit trail and to clearly explain the automation to external auditors, regulators, and other stakeholders who may need to test the controls. Documentation should be regularly updated as part of the change management process, reflecting any modifications to the automation over time.
Finally, when implementing control automation, it’s important to practice transparency. This change offers long-term benefits for the organization, and communicating updates clearly helps build understanding and support. Provide appropriate training and change management resources to ensure employees understand the changes and their role in the control process.
A balanced approach to controls and automation
While the drive toward automating internal controls is strong, many organizations adopt a hybrid model. This includes a mix of automated, manual, and semi-automated (IT-dependent) controls. The key to success lies in selecting the right tool for each specific control objective.
Preventive controls—such as access controls, approval workflows, and data validations—are often well-suited for automation, as they are typically governed by well-defined rule sets. Detective controls can also be automated, though they may require additional systems for monitoring, alerting, or data reconciliation. By nature, detective controls generate exception reports that require human judgment and follow-up. For example, if a fraud indicator is flagged, it is typically advised to involve a specialist to investigate further.
Now is the perfect time to reassess your control environment and identify strong candidates for automation. Advancements in technology are expanding the possibilities, making automation more accessible and achievable for organizations of all sizes.
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