This website uses cookies to ensure you have the best experience. Learn more

Internal Control Essay

869 words - 3 pages

Companies must have “Internal Control” to maintain principles and limitations. Internal controls are in place to help with securing the company from theft, robbery, and unauthorized use and enhancing the corrected and reliability of its accounting records by minimizing errors and making sure that are no unknown patterns in the accounting process. All U.S. corporations are required to have an adequate system of internal control because of the Sarbanes-Oxley Act of 2002 or the companies will be subject to fines and company officers may be imprisoned that do
not comply.
The Sarbanes-Oxley Act of 2002 (SOX) was implemented because of all of the corporate scandals of the recent years were uncovered. SOX were put into place because it forces companies to pay more attention to internal controls. This system forces the company’s responsibilities on corporate executives and boards of directors to make sure that the companies’ internal controls are effective and reliable and less than one part of the law, companies must develop sound principles of control over financial reporting. The companies must continually develop and check sound principles of control over financial reporting and that the system is in working condition. Independent outside auditors must attest to the level of internal control. In addition, SOX also developed the “Public Company Accounting Oversight Board”, (PCAOB) which now establishes auditing standards and regulates auditor activity. Some corporate executives have complained about the expense and time that has involved in following the requirements but 60% of the investors believe that this is a good system and would not invest in a company that does not follow SOX.
If a company announces that it has deficiencies because of a weakness in internal controls, its stock price can fall because the investors are weary about their investments at that time. Possibly it could be a shoplifting problem in the retail stores or something internal. If it is a shoplifting problem, the stores could take drastic measures and search customers as they leave but that could give the store a bad name and it could not be justified in doing so. Stores instead have become to safe guard a little differently. They have now started to install cameras and use store detectives and post shoplifting signs in the stores along with sensor equipment at the exits.
The human element has become an important step when it comes to internal controls. Any good system can become ineffective as a result of an employee being greedy or careless. Some employees do not count inventory as they should and make up numbers as they go or they may work together to...

Find Another Essay On Internal Control

Internal control based on cases - Audit - Essay

2437 words - 10 pages . Internal controls are part of a process to follow the company’s objectives in having an effective operation as well as reliable financial reporting by following the rules and regulations that are set. Auditors must look into the company’s internal controls to determine if there is a deficiency in a control that directly addresses a risk of material misstatement. ABC company is a retail chain and gets some of its supplies from Watch Makers. ABC has

Legal Guidelines for Internal Control and Audit Requirements

1664 words - 7 pages . The responsibility for designing and ensuring a system of internal controls are in place is the responsibility of management, as represented by the BOD. The auditor’s primary role is to test the systems of internal control implemented and to assure that they are effective and operate efficiently. Therefore, whereas managements function is to implement controls to protect the organizations’ assets, the function of the auditor is to perform

Effect of CIS processing on the entity's internal control structure

3476 words - 14 pages IntroductionNowadays, with the development of information technologies, the use of IT in the accounting system has increased. At the mercy of computer information system (CIS), the entity's internal control structure has been enhanced. Meanwhile, the CIS also can introduce new risks, which the entity can manage through the implementation of controls specific to IT environments. This essay focuses on how CIS improves the quality of internal

The Effectiveness of Internal Control System in the Fiscal Decentralization Application

748 words - 3 pages . The rest was being captured by local officials and politicians, either to fund other activities or for personal gain. 4.1.3 The Control Issues in ICS Structure The issues are more related to the absence of formal standard of procedure for each government activity, ineffective implementation of standard of procedure, poor continuous monitoring performance of top officials and audit settlement of internal auditor (SAA Audit report 2010-2012

INTERAL CONTROL AND RISK EVALUATION

942 words - 4 pages Running head: INTERAL CONTROL AND RISK EVALUATION Internal Control and Risk Evaluation Patricia Coleman ACC/542 April 7, 2014 Maryln Fisher In today's society, internal controls are applied to support an organization's managers to become more successfully to release the responsibilities by applying and understanding internal control concepts. Internal controls are most frequently saw as "a lot of red tapes"; however, internal controls have

Safeguarding Assets: The SOX Act

553 words - 2 pages What is internal control? According to University of Phoenix, Axia College Internal Control and Cash (2009), internal control is all of the related methods and measures adopted within an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records. The primary reasons for internal control are help companies protect their investments and merchandise against theft from everyone, including employees and

Usefulness of Internal Controls in achieving value for money

1289 words - 6 pages The study by Wallace & Kreutzfeldt (1991) was among the first to demonstrate the importance of the control environment in explaining the existence of an internal audit function. More recently, Goodwin-Stewart & Kent (2006) provided evidence that the existence of an internal audit function is related to the level of commitment to risk management. Recent case studies on internal auditing in Belgium illustrate the importance of the control

The Evolution of The Concept of Auditing

956 words - 4 pages growth made it difficult for management to maintain control of business activities and operational efficiency. To overcome these problems people known as internal auditors were appointed to review and report on effectiveness of corporate governance, risk management and control processes within the organisation. This gave rise to different definitions of internal auditing in the course of time. (Coetzee, Bruyn and Fourie) Today by definition, In

Responsibility and Control

1118 words - 5 pages between one’s behaviors and outcomes” (Ryon & Gleason, 2013). Fournier and Jeanrie reference Rotter’s study by explaining the two types of locus of control: “external control” and “internal control” (as cited in Rotter, 1966, p. 1). The purpose of Rotter’s theory was to examine “what causes reinforcement” whether it be an intrinsic or extrinsic factor (Kormanik & Rocco, 2009). Rotter measured “people’s general control expectancies” by using what is

The Sarbanes-Oxley Act: Protecting Corporate Assets

1071 words - 4 pages safety of all assets of a company by assuring no unauthorized use or access, and keeping close watches over all records and information. Another main task of the internal control is that of keeping the accounting records up to date and accurate at all times. In the past months there has been quite a bit of emphasis on the importance of a company keeping complete and accurate accounting records for many reasons. A companies well being may

Internal Controls

885 words - 4 pages Principles of Internal Controls According to Sarbanes –Oxley Act, all U.S corporations that are publicly traded are required to maintain adequate system of internal control. Internal controls were created to assist organizations and companies to reach specific objectives and goals. Simply explained “Internal controls” are procedures and actions which organizations or companies monitor them. By using Internal controls

Similar Essays

Internal Control Essay

871 words - 3 pages There are two primary goals of internal control. The first goal is to keep assets safe from robbery, theft by the employees, and any other unauthorized use. The second goal is to assure the reliability and accuracy of the accounting records. This step is done to reduce the risks of mistakes, intentional or unintentional in the accounting process. The Sarbanes-Oxley Act was implemented in 2002. This act was implemented as a result of a

Internal Cash Control Essay

1156 words - 5 pages Internal cash control is very important to any business. Without effective methods in place to ensure that funds and resources are being used in an ethical and efficient way, a company may lose money or run into many other problems. Through proper establishment of responsibly, segregation of duties, document procedures, and security measures, any company should be able to maintain their funds and feel confident that their employees are producing

Cost And Benefit Of Internal Control

881 words - 4 pages Internal control is a method of internal accounting preformed by a company, small or large, in order to improve efficiency and effectiveness through internal audits and inspections. According to internalaudit.wsu.edu, internal control is geared to the achievement of objectives in several overlapping categories, which can benefit the overall profitability of the company. Internal control is used within a company and the information is used

Internal Control Of Modern Accounting Information System

1284 words - 6 pages Internet working environment has caused the great challenge for the internal control of enterprise. Therefore, it has the important theoretical and practical significance to study on internal control of modern accounting information system. With the quick development of the economic globalization and information technology, and the widely usage of network technology, data transmission communication technology, large database technology and e-commerce