Internal Controls
- Submitted by: dalph
- Views: 1043
- Category: English: Creative Writing
- Date Submitted: 10/17/2010 02:25 PM
- Pages: 4
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Internal Control is a very important part of a business. Because there are dishonest people that seem to be honest, there needs to be safeguards for a company’s assets. A company must have good accounting records. This is done by reducing the risk of errors and irregularities in the accounting process (Internal Control and Cash; Chapter 8, pg. 340). A company must make sure that all parts of their Internal Control are in place.
The Sarbanes-Oxley Act 2002 makes companies pay more attention to the internal controls of their company. SOX law says that companies have to develop sound principles of control over their financial reporting (Internal Control and Cash; Chapter 8, pg. 341). With SOX in effect it makes it hard for companies to have scandals such as those of Enron, Tyco and WorldCom. Most companies have welcomed this Act, because it has helped the company to become aware of unlawful or errors before it is too late.
When a company has poor internal control it can cause a company’s stock prices to fall, because their materials are being counted incorrectly or not being counted at all. There is shoplifting that occurs, when the company counts on those materials to bring in money.
Limitations on internal control could come from the size of a company. If the company is small, it may it difficult to segregate duties or to provide for independent internal verification (Internal Control and Cash; Chapter 8, pg. 347). Companies could eliminate such losses by having a security guard stop and search customers as they leave the store, but this could cause a negative effect and cannot be justified (Internal Control and Cash; Chapter 8, pg. 347). But I do think it is effective when stores can hire employees to pose a customer and watch other customers and this works to curb shoplifting.
When a company establishes responsibility the company would assign one employee to one task, such as assign a grocery store the employee would be assigned to their own cash drawer,...
The Sarbanes-Oxley Act 2002 makes companies pay more attention to the internal controls of their company. SOX law says that companies have to develop sound principles of control over their financial reporting (Internal Control and Cash; Chapter 8, pg. 341). With SOX in effect it makes it hard for companies to have scandals such as those of Enron, Tyco and WorldCom. Most companies have welcomed this Act, because it has helped the company to become aware of unlawful or errors before it is too late.
When a company has poor internal control it can cause a company’s stock prices to fall, because their materials are being counted incorrectly or not being counted at all. There is shoplifting that occurs, when the company counts on those materials to bring in money.
Limitations on internal control could come from the size of a company. If the company is small, it may it difficult to segregate duties or to provide for independent internal verification (Internal Control and Cash; Chapter 8, pg. 347). Companies could eliminate such losses by having a security guard stop and search customers as they leave the store, but this could cause a negative effect and cannot be justified (Internal Control and Cash; Chapter 8, pg. 347). But I do think it is effective when stores can hire employees to pose a customer and watch other customers and this works to curb shoplifting.
When a company establishes responsibility the company would assign one employee to one task, such as assign a grocery store the employee would be assigned to their own cash drawer,...