Internal Controls

Internal Controls

Loretta Campbell

University of Phoenix

Darryle Parker

December 18, 2011

From what I understand internal controls are in place to protect the business and shareholders by controlling access to funds and confidential information. Internal controls are also used to ensure accuracy and reliability in accounting and operating data. Securing compliance with the policies of the organization and assessing the level of performance in all organizational units of the business. In my opinion internal controls are put in place to set up good business practices

The Sarbanes-Oxley Act of 2002 also known as SOX was bought about after companies such as Tyco International, Enron, Penegrine Systems, and WorldCom were affected by accounting scandals that cost investors billions of dollars when stock prices collapsed. Accountants and accounting firms are directly affected by SOX also publically traded companies including their officers, employees, and owners. It also affects holders that have more than 10% of the outstanding common shares, brokers, dealers, and investment bankers or financial analyst that are employed by these companies. It is extremely essential for any company to keep track of all accounting records and financial statements that are transacted and authenticated by the company in one financial year (Buzzle.com 2011).

The act established an accounting oversight board which is subject to the Securities and Exchange Commission (SEC). There are five members on the board and two of them may be accountants which limits the ability for accountants to change the books. The members on the board must be appointed by the SEC. The responsibilities of the board are to register public accounting firms that prepare audit reports, establishing or adopting auditing, quality control, ethics, and independence standards. The board also inspects, investigates, and discipline public accounting firms and implements compliance with the SOX...