Internal Controls and the Sarbanes-Oxley Act Essay -- SOX Act

Internal controls are in place to protect entities against theft from dishonest workers and outside predators. They are also an accurate series of checks and balances and are in place to find discrepancies. The Sarbanes-Oxley Act of 2002 (SOX) was named after Senator Paul Sarbanes and Michael Oxley. The Act has 11 titles and there are about six areas that are considered very important. (Sox, 2006) The Sarbanes-Oxley Act of 2002 made publicly traded United States companies create internal controls. The SOX act is mandatory, all companies must comply. These controls maybe costly, but they have indentified areas within companies that need to be protected. It also showed some companies areas that had unnecessary repeated practices. It has given investors a sense of confidence in companies that have complied with the SOX act. The SOX act section 404 requires that the auditor assess the company’s management of internal controls and report on it. The act requires that a company include a copy of the internal controls in the year end annual report. All financial statements must be certified by a company’s management. (Coustan, 2004) A company that announces deficiencies in its internal control will more than likely have a fall in their stock prices. Investors will not trust that company’s financial information. The investors know that the company will be hit with fines for not complying with the regulations. No honest investor wants to be involved with a company that defies the government. There are some limitations of internal controls. One is a person knowing the system. This person knows when everything is done and how it is done he or she can find a loophole and use it to his or her advantage. Another limitation is... ...l. If a transaction is missing or the cash on hand is not adding up management should be notified. Even though internal controls do not always work, every entity that has workers should have internal controls. Internal controls protect entities from dishonest workers. Internal controls are a series of checks and balances. The Sarbanes-Oxley Act of 2002 was needed to gain control of accounting improprieties. Dishonest accounting has cost company employees millions of dollars in retirement funds. It has also cost investors millions of dollars. Works Cited A Guide to the Sarbanes-Oxley Act of 2002 (2006). Retrieved December 16, 2009 from www.soxlaw.com Coustan, H., Leinicke, L.M., & Rexroad, W.M., Ostrosky, J.A. (2004). Sorbanes-Oxley What it means to the marketplace. Journal of Accountancy. Retrieved December 17, 2009 from www.journalofaccountancy.com Internal Controls and the Sarbanes-Oxley Act Essay -- SOX Act Internal controls are in place to protect entities against theft from dishonest workers and outside predators. They are also an accurate series of checks and balances and are in place to find discrepancies. The Sarbanes-Oxley Act of 2002 (SOX) was named after Senator Paul Sarbanes and Michael Oxley. The Act has 11 titles and there are about six areas that are considered very important. (Sox, 2006) The Sarbanes-Oxley Act of 2002 made publicly traded United States companies create internal controls. The SOX act is mandatory, all companies must comply. These controls maybe costly, but they have indentified areas within companies that need to be protected. It also showed some companies areas that had unnecessary repeated practices. It has given investors a sense of confidence in companies that have complied with the SOX act. The SOX act section 404 requires that the auditor assess the company’s management of internal controls and report on it. The act requires that a company include a copy of the internal controls in the year end annual report. All financial statements must be certified by a company’s management. (Coustan, 2004) A company that announces deficiencies in its internal control will more than likely have a fall in their stock prices. Investors will not trust that company’s financial information. The investors know that the company will be hit with fines for not complying with the regulations. No honest investor wants to be involved with a company that defies the government. There are some limitations of internal controls. One is a person knowing the system. This person knows when everything is done and how it is done he or she can find a loophole and use it to his or her advantage. Another limitation is... ...l. If a transaction is missing or the cash on hand is not adding up management should be notified. Even though internal controls do not always work, every entity that has workers should have internal controls. Internal controls protect entities from dishonest workers. Internal controls are a series of checks and balances. The Sarbanes-Oxley Act of 2002 was needed to gain control of accounting improprieties. Dishonest accounting has cost company employees millions of dollars in retirement funds. It has also cost investors millions of dollars. Works Cited A Guide to the Sarbanes-Oxley Act of 2002 (2006). Retrieved December 16, 2009 from www.soxlaw.com Coustan, H., Leinicke, L.M., & Rexroad, W.M., Ostrosky, J.A. (2004). Sorbanes-Oxley What it means to the marketplace. Journal of Accountancy. Retrieved December 17, 2009 from www.journalofaccountancy.com