Accounting Information System
Internal Control
Introduction:
The Sarbanes-Oxley Act of 2002 is a federal law enacted by Congress in response to accounting fraud in the early 2000s. The Sarbanes-Oxley Act imposes heavy regulatory and financial costs and compliance burdens on companies in way to prevent and curb fraud (Dumon, 2009). The main purpose of the Sarbanes-Oxley Act of 2002 was to make sure that companies are not misrepresenting their financial accounts. “Management, under the watchful eye of external auditors, now must ensure adequate internal controls are in place and that accurate financial numbers are spit out for review” (Dumon, 2009). Section 302 of the mandates the senior officers of a public company to certify that they have established, maintained and designed internal controls to ensure the accuracy of company information found in their periodic reports (Dumon, 2009). Section 404 requires management and external auditors to report on the adequacy of the internal control over financial reporting (Dumon, 2009).
Internal controls are very important for the success of every business structure and organizational design. It was introduced in 1992 by the Committee of Sponsoring Organization (COSO) of the Treadway Commission. The system helps businesses reach their goals objectives. On a basis of transactions, internal controls are actions, which are taken to complete certain objectives set out. In this paper I will be discussing components of internal controls, the primary goals, and the effects on internal controls.
What is Internal Control?
“Internal control is a process- effected by entity’s board of directors, management, and other personnel designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulation” (Gelinas, Dull, Wheeler p. 228). It consists of...