Internal Controls Essay

1192 words - 5 pages

Running head: INTERNAL CONTROLS

Internal Controls
Jared Johnson
University of Phoenix

Internal Controls

In order for a company to survive and be profitable there need to be a plan in place to safe guard their finances. These plans fall under an umbrella term known as the internal controls of a company. It doesn’t matter if these companies are huge corporations with thousands of employees or small one store operations with a half a dozen employees, or if they are public or private. There need to be some sort of controls in place to protect the company and it’s employees. This brings us to the two primary goals of internal controls, they are; (1)To safeguard its assets. By doing ...view middle of the document...

The Sarbanes-Oxley Act of 2002 mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud. Finally in 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act this legislation set out to reshape the U.S. regulatory system in a number of areas including consumer protection, trading restrictions, credit ratings, regulation of financial products, corporate governance and disclosure, and transparency(A). It is interesting to note that these measures were enacted within a few years after a financial crisis or corporate wrong doing.
The Sarbanes-Oxley Act of 2002 has changed internal controls in many ways. It created new standards for corporate accountability as well as new penalties for acts of wrongdoing. It changes how corporate boards and executives must interact with each other and with corporate auditors. It removes the defense of "I wasn't aware of financial issues" from CEOs and CFOs, holding them accountable for the accuracy of financial statements. The Act specifies new financial reporting responsibilities, including adherence to new internal controls and procedures designed to ensure the validity of their financial records. It also requires all financial reports to include an internal control report. This is designed to show that not only are the company's financial data accurate, but the company has confidence in them because adequate controls are in place to safeguard financial data. Year-end financial reports must contain an assessment of the effectiveness of the internal controls. The issuer's auditing firm is required to attest to that assessment. The auditing firm does this after reviewing controls, policies, and procedures during a Section 4040 audit, conducted along with a traditional financial audit (B).
Why would a company knowingly give out wrong information about earnings? If the earning of a company can appear to be very high the value of that company and its stock will be worth more because that company appears to be very strong. A company would rather be looked at as strong and valuable instead of weak and struggling. When a company that announces deficiencies in its internal controls, or in other words they admit that they lied on their financial reports the value of their stocks fall because, #1 the value of their stock was inflated because of their wrongful information and #2 people have lost trust in their financial reports altogether. By doing this people wonder if any thing that they report is true or not.
Unfortunately no matter how well internal controls are designed there are still some...

Other Essays Like Internal Controls

Cash and Internal Controls Essay

2178 words - 9 pages Chapter 4 Cash and Internal Controls Answer true-or-false questions about occupational fraud (LO1) E4-1 Below are several statements about occupational fraud. 1. For most large companies, occupational fraud is minimal and internal controls procedures are unnecessary. 2. Managers have a variety of reasons for manipulating the numbers in financial statements, such as maximizing their compensation, increasing the company’s stock price

Xacc 280 Wk 8 Assignment Internal Controls

1165 words - 5 pages Running Head: INTERNAL CONTROLS Internal Controls XACC 280 Internal Controls This paper will cover the ins and outs of internal controls. It will also tell why they are important not only to companies, but why they are important to investors, creditors, and even the public too. Internal controls are a serious of methods and measures that companies put in place to insure that errors or irregularities in the accounting process

Xacc 280 Week 8 Internal Controls

1353 words - 6 pages In the industry of accounting, organizations seem to need a system put into place for them that will reduce (or possibly eliminate) fraud. Every business must have some way to protect its resources, both physical and intangible. This system is called an internal control. Internal controls are designed to help the organization accomplish goals and objectives without hindering the normal workflow of day to day business. There are two main

Ratios, Vertical, and Horizontal Analysis

827 words - 4 pages Individual Internal Controls Financial Accounting Concepts and Principles Leda Solis September 9, 2012 University of Phoenix Zeno Gavales Internal Control is the process of ensuring the integrity of the accounting and finance records of company, and to catch any accounting irregularities. Internal Controls are used to evaluate the efficiency of a company, and to maintain the integrity of financial records. Controls are updated on the

Audit Report and Internal Control Evaluation

561 words - 3 pages the same period. Our company also assessed Apollo Shoes financial reporting internal controls based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria) and determined that they are adequate and effective for the period ending December 31, 2012. Apollo Shoes Inc. management holds sole responsibility for maintaining effective internal controls, validity of their financial statements. CBA Auditing responsibility is

Acct504 Case Study 2

1009 words - 5 pages LJB Company: Internal Controls. This proposal will inform the president of the new internal control requirements necessary if the LJB Company is to go public. This proposal will also inform the president of the already properly functioning internal controls, and the purposed purchase of the indelible ink machine. Finally, this proposal will inform the president as to the internal control measures which are not being taken, and thus inadequately

Case Study

1215 words - 5 pages Running header: Internal Controls LJB Company: Internal Controls Summary President of LJB Company – AMS Consultant February 9, 2014 ACCT504 Accounting & Finance: Managerial Use Analysis Table of Contents Introduction 3 Internal Control Requirements 3 LJB Company: Current Internal Controls 4 LJB Company: Recommendations for Change to existing Internal Controls 5 Conclusion 6 References 7 Introduction AMS

Case Study 2-Acc504

1576 words - 7 pages Case Study 2: DATE:    October 6th, 2013 To,   The President LJB Company SUBJECT:        The need for Internal Controls We would like to thank you for the opportunity provided to us in evaluating the internal control systems of your company. As you know, internal control systems are paramount to securing the assets of any company or organization. In your case Control System will play an important role in limiting the risk of

Acct3708 Week Six Notes

739 words - 3 pages evaluating and testing the internal control rather than by substantively verifying a small proportion of transactions * Tests of controls are usually concerned with gathering evidence concerning the effectiveness and continuity of controls associated with the processing of particular classes of transactions * The audit program sets out the combination of evidence-gathering procedures that the auditor believes will result in the most effective

Inventiry Control

1229 words - 5 pages Internal Control and Risk Donica Campbell ACC542/ Accounting Information Systems February 1, 2011 Professor Linda Juniel Introduction Learning Team A has been assigned the task of evaluating the flow chart process that was assigned in week 2 of Kudler Fine Foods. This paper is to analyze the risks in the systems that Team A analyzed. Identify all risks and internal control points by incorporating the controls and risks

Koss Case

657 words - 3 pages lax internal controls could suffer similar fates. Although there are situations where the cost would outweigh the benefit, I think it is still important for internal controls to be tested. There could be a provision for these smaller companies to have a smaller scale attestation of internal control effectiveness if they show that the costs outweigh the benefits. 5.) I think the big overall internal controls, especially in this Koss case

Related Papers

Internal Controls Essay

591 words - 3 pages Alexandra Lambert Internal Controls XACC/280 May 4, 2014 Primary Goals Internal controls are in place to ensure proper financial accounting, reporting, operations, and compliance are preformed properly. Without them, chaos could ensue and many companies go bust because of failed internal controls or lack thereof. Two of the primary goals of internal controls are maintaining proper records and reports and ensure the safety of financial

Internal Controls Essay

972 words - 4 pages Internal Controls Attention: President/CEO The purpose of this report is to discuss internal controls and security for LJB, and compliance with current policies. In order to be receptive to recommendations and change, it is imperative that a thorough understanding of how internal controls and security play into the profit and growth of the company. Effective internal control gives reasonable assurance, not guarantee, that all business

Internal Controls Essay

856 words - 4 pages evolving risks that arise from factors and changes in the business environment. The goal of internal control is to reduce poor judgment, human error, employee tampered controls, and the occurrence of unforeseeable circumstances (NIVRA, 2007). Employees of an organization are an essential part of internal control. However, management, the board of directors, internal auditors, and external auditors are those accountable for the development and

Recommendations On Internal Controls Essay

1431 words - 6 pages predisposition is to optimize the procedures and the results to offer further effective service to your customers 1-Pursuant to the Sarbanes-Oxley Act of 2002 (the Act) it is mandatory for SEC registrants and their independent auditors to report on internal control in the work place. Sarbanes-Oxley Act of 2002 (SOX) requires all publicly traded U.S. corporations maintain an adequate system of internal controls. SOX imposes more responsibilities on