Xacc Week 8 Assignment

Internal Control

XACC/280

08/14/2011

In this world, companies and businesses need a way of monitoring themselves, particularly in the accounting department. This is an act of preventative maintenance, ensuring that the financial reporting is reliable. Any successful business has a strong internal control model, without it, operations won’t run efficiently. A type of feedback, internal controls look at the quality and functionality of different aspects of a business ( eHow Money, n.d.). Its similar to the computer of an automobile, the computer receives feedback from all the different sensors and parts from the engine and the engine makes small adjustments to fuel and air ratio as well as tells the driver of any serious problems via check engine light and other dash indicator lights. A strong internal control model will ensure your company has the most reliable financial records along with having a greater unity between departments and great moral all together.

The Sarbanes-Oxley Act of 2002 is a federal law which protects investors against fraudulent accounting activities. The main goal to lower and prevent accounting fraud, the Sarbanes-Oxley Act (SOX) introduced major changes in regulating in financial practices and corporate governance all together. The SOX was implemented after many major accounting scandals came to light, including Enron and WorldCom. The new rules and regulations of the SOX act either amend or supplement the existing rules and regulations. The two major changes in regulation are section 302 and 404. In section 302 it states it’s mandatory that senior management endorses the accuracy of the financial report statements. In section 404 its mandates that management and auditors must work together to establish internal controls reporting methods on the ability of those controls.

As required by the SOX Act all companies are required to report any deficiencies in their internal control model. This is definitely the last thing a...