Federal Government Financial Internal Controls

Fred Walters

ACCT612 Section 9040

University of Maryland University College

4/19/2014

Since 2002 and the passage of Sarbanes-Oxley Act (SOX), internal controls have played an intricate role in public company audits. Companies have been spending thousands of dollars creating and maintaining internal controls. But what about the Federal Government and its requirements for financial internal controls? This paper will look at several sources on government internal controls and compare the differences on these controls. Government fraud is a very big problem; compared to the private sector, it never gets the media attention it deserves. Just recently it was reported that State Department cannot account for $6 million dollars it that was disbursed from the Federal Treasury. This is just one example of the millions of dollars that go unaccounted for in the Federal Government and how internal controls could help prevent it. I’ve worked for the Federal Government since 2003. During my tenure, I’ve been with 3 different organizations and noted that they have very limited internal controls on financial reporting.

Tierney, Kearney, and Fernandez (2004), state that “the Sarbanes-Oxley law’s Section 404 requires that public companies make assessments of the effectiveness of their internal controls based on a “suitable, recognized control framework established by a body of experts that followed due process procedures to develop the framework,” specifically citing the Internal Control-Integrated Framework developed by the Consortium of Sponsoring Organizations (COSO) of the Treadway Commission in 1992” (p. 36).

Reliable internal controls have been long overdue, there are several opinions on the course of action that should be taken. Tierney, Kearney, et al. (2004), also “state in the absence of an effective system of internal controls, problems are likely to abound, multiply and spread. When internal controls are not in place and uniformly applied day in and day...