Acc 504 Case Study 2

ACC 504

Case Study 2

DeVry Keller School of Graduate Management

Publicly Traded Companies Internal Control Requirements

Becoming a publically traded company is a big decision. LBJ would have to weigh the cost versus the benefit. Investors want accurate records of the company’s earnings and finances. There are certain rules that a publically traded company must adhere to in order to be in compliance with the Sabarnes Oxley Act or (SOX). For smaller companies with less than 125,000,000 in revenue becoming publically traded and compiling with SOX can be a significant obstacle. “A company must have a set of rules in place that act as internal controls to prevent fraud and detect it when it does occur. In addition to maintaining internal controls a company must also hire an independent auditor to attest that the internal controls are adequate and working. The company’s executives and board of directors must ensure that these controls are reliable and effective (Kimmel, 2013)”. Although it is not required, most publically traded companies have established a code of conduct and also an ethics board to review questionable actions and decisions made. When there is a system in place that gives guidance and management supports that system it is less likely that an employee will be able to commit fraud or other unethical activities. Fraud can occur when there is opportunity, a perceived need due to financial pressure, and rationalization, what I am doing isn’t wrong. Preventing fraud is a matter of having controls which prevent opportunity, maintaining control and promoting from top management to the employee level the importance of ethics and integrity in the company. Internal control systems vary by company but they need to include top down ethical culture, risk assessment, control activities, information and communication, and monitoring (Kimmel, 2013). Failure to comply with the SOX rules can result in significant fines and even imprisonment. When implementing...