Case Study 2 Internal Control
acct 504 | MANAGERIAL USE ANLYSIS | CASE STUDY 2 INTERNAL CONTROL |
12/1/2012 |
Case Study 2 Internal Control
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A requirement is important to know that all publicly traded U.S. corporations are required to maintain an adequate system of internal controls and procedures for financial reporting in accordance with the Sarbanes-Oxley Act Section 404. It is the responsibility of your executives to ensure there are dependable and effective controls in place, and auditors from outside the company must prove to the adequacy of the internal control systems as well. This information must be recorded in an internal control report each fiscal year as a part of the annual Exchange Act report. The intention of this act is to reduce the possibilities of corporate fraud by mandating specific procedures for financial reporting.
It is recommended that your company adopt the framework defined by the Committee of Sponsoring Organizations of the Tread way Commission (COSO) in order to comply with the SOX Act. The first of five components of this framework is to create the control environment. This refers to the implication that management places on a company’s risk management and accountability processes and how they foster an environment of compliance with the company’s internal control systems. Next, you should conduct a risk assessment which is the process of identifying potential threats to legal, financial or overall operational security. Control activities are another component, which includes the actions taken by a company through policies, proceedings and best practices to keep assessed risks to a minimum. Information and communication methods should be used to inform and educate your employees on all of the control activities such as distributing employee handbooks and posting information on bulletin boards. The last section should be to conduct self-inspections in order to monitor the effectiveness of control activities.
In assessing your current level of
12/1/2012 |
Case Study 2 Internal Control
.
A requirement is important to know that all publicly traded U.S. corporations are required to maintain an adequate system of internal controls and procedures for financial reporting in accordance with the Sarbanes-Oxley Act Section 404. It is the responsibility of your executives to ensure there are dependable and effective controls in place, and auditors from outside the company must prove to the adequacy of the internal control systems as well. This information must be recorded in an internal control report each fiscal year as a part of the annual Exchange Act report. The intention of this act is to reduce the possibilities of corporate fraud by mandating specific procedures for financial reporting.
It is recommended that your company adopt the framework defined by the Committee of Sponsoring Organizations of the Tread way Commission (COSO) in order to comply with the SOX Act. The first of five components of this framework is to create the control environment. This refers to the implication that management places on a company’s risk management and accountability processes and how they foster an environment of compliance with the company’s internal control systems. Next, you should conduct a risk assessment which is the process of identifying potential threats to legal, financial or overall operational security. Control activities are another component, which includes the actions taken by a company through policies, proceedings and best practices to keep assessed risks to a minimum. Information and communication methods should be used to inform and educate your employees on all of the control activities such as distributing employee handbooks and posting information on bulletin boards. The last section should be to conduct self-inspections in order to monitor the effectiveness of control activities.
In assessing your current level of
References: http://www.sox-online.com/act_section_404.htlm