Internal Controls and the Sarbanes-Oxley Act of 2002 Essay examples --

In order to be successful in business, a fellowship must be able to trail their assets. This tracking musical arrangement is typically done by a bookkeeper and must be reliable in order to be effective. The focal point a company ensures their financial records ar reliable is by setting up a system of internal controls. Internal controls allow a company to protect its assets from fraud and theft as well as ensuring records are kept accurately by reducing errors and irregularities (Keisco, Kimmel and Weygandt, 2008). Internal controls work by depute responsibility, separating duties to provide checks and balances, hiring an independent verification agent and through the use of technology and physical controls. In many instances, internal controls are required and overseen by the Sarbanes-Oxley figure of 2002. Assignment of responsibility for certain functions of the bookkeeping and accounting process ensures that when a problem occurs a specific person is accountable. This, in turn, provides an incentive to that person to do their job correctly because any issue or problem will be their sole responsibility. Splitting duties has a similar impact on employees. By providing a system of checks and balances, i.e. one person keeps the records while another keeps the assets, the chance for fraud is greatly decrease and honest mistakes are easily caught. There are many physical, mechanical and electronic controls that provide further safety for a companys assets. These include passwords, safes, alarms, security cameras, time clocks and locks (Kiesco et.al, 2008). The use of an tender or other third party to independently verify the bookkeeping and accounting procedures performed by employees adds another layer of safeguarding to a companys inter... ... track the error to the fraudulent employee. In conclusion, internal controls include separation of duties, assignment of responsibilities, third-party verification and the use of mechanical and physi cal controls. In and of themselves, these tactics stop and hold open much abuse of the bookkeeping and accounting systems. The addition of Sarbanes-Oxley requirements in 2002 require that a company enact internal controls and assign responsibility of the control system to executives and directors, further providing insurance that financial reporting is accurate. Without this insurance that reports are accurate, company stock will fall and investors will be lost. Even with intrinsic limitations, the lordly aspects of good internal controls far outweigh the negative implications. Good internal controls equal accurate financial records and future company success.