Share
Explore BrainMass

Internal Controls: Sarbanes-Oxley Act, Prevention Detection

Summarize your ideas about internal controls.
An introduction to internal controls, explaining in your own words the two primary goals of internal control
A description of how the Sarbanes-Oxley Act of 2002 has affected internal controls
An explanation of why a company that announces deficiencies in its internal controls would probably experience a fall in the price of its stock
A synopsis of what you consider to be the limitations of internal controls - Cite specific examples.
A comparison of the internal control principles of (1) establishing responsibility, (2) using physical, mechanical, and electronic controls, (3) segregation of duties, and (4) independent internal verification.

Solution Preview

An introduction to internal controls, explaining in your own words the two primary goals of internal control

Internal controls provide reasonable (not absolute) assurance that policies and processes are designed and implemented to reduce business and financial reporting risk, operate efficiently, comply with laws, and deter fraud. The two primary goals are to find and fix errors quickly and deter unauthorized activities.

For internal controls over financial reporting, the two main goals are to safeguard assets and to ensure that errors or irregularities are found and fixed promptly so that only authorized transactions are recorded and none are left out.

A description of how the Sarbanes-Oxley Act of 2002 has affected internal controls

Sarbanes Oxley Act of 2002 (SOX) resulted in some new requirements for internal control systems. First, management had to assess the effectiveness of controls (document and test their own controls). Second, "issuers" (those issuing stock or bonds to the public) must have integrated audits, meaning an audit of controls and financial statements. Auditors will test the client's tests of controls and issue an opinion about whether the controls are working.

An ...

Solution Summary

Your discussion is 579 words and two references and mentions the role of prevention and detection and the limitations of a well-designed system of controls. The comments also show how Sarbanes Oxley improved internal control awareness and testing.

$2.19