Internal Controls Week 8 Day 7
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Internal Controls
Deanna Cain
Axia, University of Phoenix
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Internal Controls
Internal Controls were designed to guarantee and certify reliability in financial reporting, and to ensure effective and efficient operation in compliance with regulations and pertinent laws. Using Internal Controls, the company can protect all assets from theft, acquisitions, and controversial scrutiny. The two primary goals of Internal Controls are protecting the companys assets, and improve the accuracy and trustworthiness of the companies accounting records in keeping within the Sarbanes Oxley Act of 2002.
President George Bush authorized the Sarbanes Oxley Act of 2002, when the Act was presented to him after it had passed the senate by a wide margin. The Sarbanes Oxley Act is described to be the answer to the prevention of fraudulent acts in accounting records after the scandal of Enron and World Coms fraudulent practices causing the stock market to drop, and putting many employees out of work.
The affect that the Sarbanes Oxley act of 2002 has had on the Internal Controls is tremendous. One affect is that the Act has closed the black hole referred to as the opportunity to present an illusion of financial strengths of a company, by implementing a rubric on management of electronic records is the falsification, revision, and damage of accounting records. The Three part rule states;
“Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of
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Any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.” (Sarbanes Oxley Act, Rule Sec. 802 (a)).
“Any accountant who conducts an audit of an issuer of securities to which section 10A(a) of the Securities Exchange Act of 1934 (15 U.S.C 78j-1(a)) applies, shall maintain all audit or review work papers for a period of 5 years from the end of the fiscal period in which the audit or review was concluded.” (Sarbanes Oxley Act, Rule Sec. 802 (a) (1)).
“The Securities and Exchange Commission shall promulgate, within 180 days, such rules and regulations, as are reasonably necessary, relating to the retention of relevant records such as work papers, documents that form the basis of an audit or review, memoranda, correspondence, communications, other documents, and records (including electronic records) which are created, sent, or received in connection with an audit or review and contain conclusions, opinions, analyses, or financial data relating to such an audit or review.” (Sarbanes Oxley Act, Rule Sec. 802 (a) (2)).
The Sarbanes Oxley Act should prevent deficiencies in the Internal Controls, if followed. If a company were to make public deficiencies in its Internal Controls, the price of its stocks would fall dramatically, as in the case of World Com. The deficiencies in internal controls of World Com in 2002 was announced to the public do to the unethical behavior, and falsification of accounting records, thus causing stocks to decrease from $15.00 per share to .20 cents per share. When a company can no longer be trusted,
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Investors will pull back and no longer be interested