Internal Controls. Kind of like a brick wall, or a fire wall on a computer. Internal controls act as a way to keep a company and its assets safe, as well as make sure that the company maintains complete and accurate accounting records. Internal controls are in charge of the overall well being of a company from its assets to its employees, even to its sales and reputation. A lot of things are involved with internal controls such as; Sarbanes-Oxley Act, stock well being, well being and safety of assets and accounting accuracy.
One of the Internal Controls main purposes is that of keeping a companies assets safe, whether that be from employees, robbers, or misuse from outside parties. As one can figure keeping a companies assets would be a very important task that would keep a company running smoothly and successfully if all went well. Internal Controls will work to maintain the 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 depend on its records accuracy, if there happen to be a problem spotted a simple solution would be to revert back to the records, but what if the records are inaccurate, or incomplete? It is extremely important that Internal Controls keep close watch over the accuracy of the companies accounting records of all forms.
The Sarbanes-Oxley Act of 2002 or SOX was created by the governments sector of Public Company Accounting Oversight Board or the PCAOB in response to the overload of company scandals stemming from the Internal Controls. The law basically just stressed the importance of a company to watch over their internal controls, and their practices, with out supervision of this sector problems may arise landing a company in a scandal that may damage their reputation or sales. The law states that a companies head boards must create principals to follow to ensure the Internal Controls have a purpose, and that the purpose is complete and working successfully. Though the SOX or Sarbanes-Oxley Act of 2002 may be controversial the overall verdict is that the Act has helped many companies maintain control and persistence in successful internal controls.
As many companies like; Enron, Worldcom, and tyco, have seen, scandals in the internal controls or in which the internal controls have over looked can ruin a company. Many company scandals have been done, and discovered. A scandal within a company can cause a bad reputation for that company and their partners, as well as loss of profit due to loss of customers, and even loss of stock price, because of the decrease in stock holders willing to invest their money into a...