Internal Controls for a Newly Public Company: A Finance and Accounting Case

A case: the finance function the day after the listing

Newly public company internal controls are rarely designed from scratch. They are usually the private-company controls the business already had, stretched to meet a standard they were never built for. This case follows a situation finance teams meet after many listings: the IPO has completed, the first periodic reports are due, and the finance function is working with the same people, processes and approval habits it had a year earlier. It sets out the sequence of finance work that followed, from assessing reporting requirements through controls, journals, reconciliations and processes, to capacity, training and long-term readiness. The case is representative, not a named company, and it is the type of situation NEO Expertise supports finance teams through.

The Situation

The company has listed its shares on a regulated market. Revenue has grown quickly over the previous three years, and the finance team has grown with it, but mostly by adding people to existing processes rather than by redesigning them.

During the IPO audit, the auditors raised observations on three areas: manual journal entries posted and approved by the same person, balance sheet reconciliations that were months out of date, and key processes with no written procedures. None of these prevented the listing. All of them now have to be fixed before the first annual audit as a listed company.

The core problem is not competence. It is that a private-company finance function is being asked to operate to public-company standards, on a public-company timetable, without extra hands.

Step 1: What Changed After the Listing

The first task was an honest assessment of the new requirements against the current finance function. For an issuer with securities on an EU regulated market, the Transparency Directive 2004/109/EC requires an annual financial report within four months of the year end and a half-yearly report within three months of the period end. Under the IAS Regulation 1606/2002, the consolidated accounts must be prepared under EU-endorsed IFRS.

The assessment covered:

• Periodic reporting: what is published, when, and who prepares and reviews each part
• The annual audit: scope, timetable and the auditor’s expectations on controls evidence
• Wider compliance obligations that touch finance, such as disclosure of inside information
• Finance team capacity against the new calendar, month by month

Step 2: Internal Controls and Journal Entries

The controls review started with the existing controls, as they actually operated, not as described in the IPO documents. Each key control was tested for three things: who prepares, who approves, and what evidence is kept.

The findings were typical of a fast-growing private company:

• No segregation of duties on journals. Several people could create and approve their own manual entries in the accounting system.
• Review without evidence. Reviews happened, but nothing recorded who reviewed what, or when.
• One approval level for everything. A €500 accrual and a €2 million revenue adjustment followed the same path.

The fix was a journal entry policy with standard templates, mandatory supporting documentation, separate preparer and approver roles enforced in the system, and tiered approvals by value and account type.

Illustrative approval matrix. Thresholds are examples, not a recommendation for any specific company.

Journal type	Value	Approver
Recurring accruals from template	Up to €50,000	Accounting team lead
Manual entries, all accounts	€50,000 to €500,000	Financial Controller
Manual entries, all accounts	Above €500,000	CFO
Any entry to revenue, cash or equity	Any amount	Financial Controller, minimum

Step 3: Account Reconciliations

Reconciliations were the largest single workstream. In this case, the review found 214 balance sheet accounts requiring reconciliation, of which 61 had not been reconciled for more than 90 days and 12 carried unexplained differences. These figures are illustrative.

The sequence that worked:

1. Rank by risk. Cash, receivables, payables, intercompany and suspense accounts first, because they carry the most audit and fraud exposure.
2. Bring each one current. Reconcile to the source document, not to last month’s reconciliation: bank statements, sub-ledger reports, counterparty confirmations.
3. Find the root cause of every difference. A difference cleared by a write-off without a cause will return next quarter.
4. Standardise. One template, one frequency per account, and a reviewer sign-off with a date.

Intercompany accounts deserve particular care in a listed group, because they have to eliminate cleanly on consolidation. The method in reconciling intercompany balances applies directly.

Step 4: Processes, Reporting and Systems

With controls and reconciliations under way, the team identified its key accounting processes (order to cash, purchase to pay, payroll, fixed assets, close and consolidation) and wrote a standard operating procedure for each: steps, owners, templates, deadlines and the controls embedded in them.

Financial reporting was strengthened around the new calendar: a monthly close with a fixed timetable, quarterly reviews, audit support files prepared as part of the close rather than at year end, and documentation behind every published figure. The same close discipline appears in preparing subsidiaries for group reporting, because a listed group is only as fast as its slowest entity.

On systems, the review looked at how the accounting system was actually used: which steps were manual, which reports were rebuilt in spreadsheets each month, and which repetitive tasks could be automated safely. Automation came after the process was fixed, never before.

Step 5: Capacity, Training and Handover

The capacity assessment compared the work in steps 1 to 4 with the hours available. Two gaps appeared: a temporary peak (clearing the reconciliation backlog and writing procedures) and a permanent one (the listed-company workload itself).

The answer was different for each. Temporary finance support covered the peak, while the company defined and hired the permanent roles it needed, including specialists in technical accounting and financial reporting. Throughout, accounting and finance staff were trained on the new procedures and on internal controls, and knowledge was transferred so the permanent team could run everything independently once the temporary support stepped back.

Long-term readiness meant keeping it running: reconciliations monitored monthly, procedures updated when processes change, and the finance team scaled with the business rather than after it.

Where Newly Listed Finance Teams Struggle

• Fixing documentation, not behaviour. A written approval policy is not a control if the system still lets the preparer approve their own journal.
• Clearing reconciliation differences with write-offs. It makes the backlog disappear once. Without root cause analysis, the same differences return.
• Hiring permanent staff into broken processes. New hires inherit the old habits. Fix the process first, then hire into it.
• Treating the first year as a one-off project. Public-company reporting repeats every quarter. Whatever is built must be run by the permanent team.

This case does not fit every listing. A company that listed after a long private-equity ownership may already run to lender and investor reporting standards, and needs a much smaller change. The steps above assume a finance function that grew informally. Where the gaps are mainly in group consolidation after acquisitions, start instead with the first 100 days finance integration roadmap.

The Newly Public Company Finance Checklist

Use this as a working checklist. Each item is a check to complete, not a topic to consider.

Reporting requirements

• ☐ Map every periodic reporting obligation and its deadline
• ☐ Confirm audit scope, timetable and controls evidence expected
• ☐ Assess finance capacity against the new calendar, month by month

Controls and journal entries

• ☐ Test each key control as it actually operates, not as documented
• ☐ Enforce separate preparer and approver roles in the system
• ☐ Set tiered approvals by value and by account type
• ☐ Standardise journal templates and require supporting documentation
• ☐ Evidence every review with a name and a date

Account reconciliations

• ☐ Rank accounts by risk and set a frequency for each
• ☐ Bring high-risk accounts current and reconcile to source documents
• ☐ Find the root cause of every difference before clearing it
• ☐ Standardise templates and reviewer sign-off

Processes, systems and people

• ☐ Write a standard operating procedure for each key process
• ☐ Fix the process before automating any part of it
• ☐ Prepare audit support files as part of the close
• ☐ Define the permanent roles the listed company needs
• ☐ Train staff and transfer knowledge so the team runs it independently

Frequently Asked Questions

What internal controls does a newly public company need first?

Start with segregation of duties on manual journal entries, evidenced review of balance sheet reconciliations, and tiered approval levels by value. These three areas carry the most audit risk, are the most common auditor observations after a listing, and support every other control in the financial reporting process.

How often should a listed company reconcile its balance sheet accounts?

High-risk accounts such as cash, receivables, payables, intercompany and suspense should be reconciled every month, with dated reviewer sign-off. Lower-risk accounts can move to quarterly. Each account should have a defined frequency, a standard template, and a named preparer and reviewer.

Should a newly public company use temporary finance support?

Temporary support fits the one-off peak: clearing reconciliation backlogs, writing procedures and supporting the first periodic reports. The ongoing listed-company workload needs permanent roles. The strongest approach uses both, with temporary support transferring knowledge to the permanent team before it steps back.