Sarbanes-Oxley

Sarbanes-Oxley Analysis

Tim Jenkins

ACC340

November 9, 2012

Professor Deborah McKinsey

Sarbanes-Oxley Analysis

Corporate scandals dealing with fraudulent and unethical practices or procedures by company executives and employees have increased the need for regulation of the handling of company financial data. The Securities and Exchange Commission has developed legislation to ensure companies have implemented internal controls over the business’ financial data to protect the company shareholders. “The U. S. Congress passed the Sarbanes-Oxley Act of 2002 as a strong deterrent to such unethical behavior” (Bagranoff, Simkin, & Strand, 2008, p. 12). The implementation of internal controls in a company are designed to ensure the company is complying with all government laws and regulations.

Impact on internal controls

Internal controls in a company are designed to ensure company operations are functioning effectively and efficiently, and to ensure the reliability of financial accounting and reporting. The internal controls excludes companies from providing personal loans to executives, the Chief Executive Officer must personally vouch for the accuracy of financial statements, and private companies must hire independent auditors. The success of companies is based on the revenue received from all available sources. The overstatement of revenue can lead to erroneous information being posted to the company’s financial statements.

The revenue cycle of an accounting information system is designed to track sales of products or services throughout the company. The sale is recorded as revenue when it is processed and payment amount may be recorded to accounts receivable if not paid up front or to cash if payment is received immediately. Fraudulent transactions may be recorded by employees of the finance department to allow them to embezzle funds from the company. Executives and managers must

Reference

Bagranoff, N. A., Simkin, M. G., &...