The Sarbanes-Oxley Act: Internal Controls

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Businesses today are required to follow set guidelines and regulations when it comes to keeping and reporting business transactions. The goal of these guidelines and regulations is to ensure the accuracy of a business accounting reports and to also make sure that company assets are not misappropriated or misused by its employees. Internal controls within a company fall under various categories; in this paper I will discuss the establishment of responsibility, physical, mechanical, and electronic controls, segregation of duties, and independent internal verification. In addition to internal controls I will also discuss acts of Congress that have paved the way for the current internal controls, and the limitations of internal controls. The first items that I will discuss are the different types of internal controls. Internal controls that companies use include but are not limited to; establishing responsibility, using physical, mechanical and electronic controls, segregation of duties, and independent internal verification. All of these internal controls work together to ensure that company assets are not being misused by employees, as well as making sure that the financial reports are as accurate as possible. The basis for establishing responsibility is to help eliminate the problem of not being able to find out which employee is responsible for a miscalculation. For example, a cashier is required to start a new cash drawer at the beginning of the night and close out that same cash drawer at the end of their shift, this accountability makes the process simple if the cash drawer is over or under in money at the end of the shift. The use of physical, mechanical and electronic controls helps to monitor and limit propert... ... middle of paper ... ...he sale to be for a lesser amount. The goods were shipped to the wrong address and the sales price was altered to say it was a greater amount and more commission on the item was paid, all the while the goods are at another employee’s house. Another limitation on internal controls is the fact that some businesses might not have the money or the manpower to allow for separation of duties, if this happens then the internal controls put into place will not be as affective. In conclusion, the goal of these guidelines and internal controls is to ensure the accuracy of a business accounting reports and to also make sure that company assets are not misappropriated or misused by its employees. When appropriately followed and adhered to internal controls enable companies to effectively and efficiently safeguard company assets and provide accurate financial statements.

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