Axia College University of Phoenix
Internal controls are used by companies to help them reach their goals and objectives. This paper will discuss two primary goals of internal controls, the effects on internal controls caused by the Sarbanes-Oxley Act of 2002, stock price drop due to internal control deficiencies, and internal control limitations.
There are a few goals in internal controls, but the main two are safeguarding assets from theft and unauthorized use as well as enhancing the accuracy of accounting records and their reliability. Internal controls are brought into place within companies and organizations to achieve a goal and help avoid unnecessary problems while understanding the focused target without a resource loss. Implementing and using these controls, allows for management to more easily adapt to the economic changes and their competition while ensuring that the laws and regulations are still abided by.
We all know that in business not everyone is honest. Within business this will include customers of the business and employees. Internal controls that are implemented correctly can help the company identify cost consuming employees with unethical behavior. Of course there will be times that an error will occur that is truly a mistake. Accountants can and have made such mistakes, like simple booking errors. This type of mistake could be identified with implemented internal controls. Mistakes which are not intentional play a key part in the company’s minimization through the increasing of accuracy and reliability in their accounting records.
Due to scandals of corporate accounting, President George W. Bush enacted the Public Company Accounting Reform and Investor Protection Act. This is known as the Sarbanes Oxley Act of 2002. Some of the scandals that caused the act to fall into place are the well known Enron, Tyco International, and World Com. This act is intended to increase the overall quality of...