Internal Controls And The Audit Process

Anderson, Olds, and Watershed rely on Apollo Shoes management for the financial statements. In addition, Apollo Shoes management is responsible for internal control over financial reports, ensuring the company complies with applicable laws and regulations, providing all financial records and other related financial information to the firm, and providing a representation letter at the conclusion of the audit confirming management’s

Auditors have the responsibilities as well as management to report internal controls. The auditors must examine closely management’s claim of effectiveness and also physically test the controls. After the examination, the auditors should express their opinion and any recommendations to fix any internal control weaknesses.

Internal controls represent an organization’s processes and procedures used to meet its goals and objectives and serve as a defense in safeguarding assets and preventing and detecting errors, fraud, and abuse. Effective internal controls provide reasonable assurance that an organization’s objectives are achieved through (1) reliable financial reporting, (2) compliance with laws and regulations, and (3) effective and efficient operations. The passing of the Sarbanes-Oxley Act of 2002, as well as the numerous corporate frauds and bankruptcies over the past decade—including some

The section 302 in Title III - “Corporate Responsibility for Financial Reports”, would have made the CEO and CFO, which are Monus and Finn, respectively, state their understanding on how fair the financial statements presents the condition and result of operations in all material aspects. In part 5, this section also requires disclosure of significant deficiencies identified in internal control to the auditors and audit committee, among other disclosures related to fraud.

I take your concerns with the doubling of the audit fees very seriously, therefore, it is my responsibility to explain to you the justification for the fee increase. You are probably aware of the fact that Sarbanes-Oxley Act and PCBO Auditing Standard No.5 introduced changes in the requirements for the issue of financial statements for public companies. In fact, under Section 302 of the Sarbanes-Oxley Act management of the company is required to assess its company’s internal control and present the report on internal control over the financial reporting. In the case where there is a material weaknesses in internal control, management needs to inform the public about it. Also, Section 302 stipulates that a company’s CEO and CFO will have to certify its company’s financial statements which means that there will be personal legal consequences if they present misleading financial statements. In addition, changes were made regarding the auditing process of internal controls of the company. These changes include the integration of the audit of internal controls with the audit of financial statements. In accordance to PCABO Auditing Standard No. 5, our team will have to conduct a multi-step audit process where we’ll have to plan the engagement, use a top-down approach, perform testing of controls, evaluate identified deficiencies, if there are any, in order to identify material weakness in internal control, and issue an opinion regarding the effectiveness of the internal control. Furthermore, to satisfy our adherence to new requirements we’ll have to produce

LJB Company inquired about new internal control regulations required if they choose to go public. This report will discuss the regulations

Section 404 of the Sarbanes-Oxley Act requires management to evaluate and test the effectiveness of their company’s internal controls over financial reporting. The company’s auditor has to issue a formal report on management’s evaluation of its controls.

     The second standard requires public accounting firms to audit internal controls in conjunction with an audit of financial statements. The second standard requires public accounting firms to attest that the internal controls documented and set forth by the company audited are sufficient to ensure the integrity of the financial statements (Griggs). This second standard is a real breakthrough in ensuring the financial statements of a company are sound. It is impossible for a public accounting firm to audit every detail of large multi-national company. Strong internal controls reduce the risk of material misstatements to a company’s financials caused by negligence or fraud. Maintaining internal controls is no longer enough. Companies must now analyze and document their internal processes (Calabro). When a public accounting firm issues an unqualified opinion on the internal controls of a company, which will be required starting November 15, they are stating that the internal checks set forth adequately protect the assets of a company from negligence or fraud.

The general area to be studied in this journal article is Section 404 of the SOX. The article looks to understand the consequences associated with companies who fail to report on internal controls or material weaknesses. Understanding the consequences involved is significant since it falls on managers and auditor’s incentives to be able to find and report internal control weaknesses. In addition, it is important to understand why some companies list internal control weaknesses, when in fact they are material weaknesses within these controls. The purpose of this study is determine the consequences associated with failure to reporting internal controls under Section 404.

One of the major requirements that emerged from the Act is section 404. Section 404 requires each annual report of an issuer to contain an "internal control report," which shows the following:

The final responsibility for the integrity of an SEC registrant’s internal controls lies on the management team. U.S. companies need to refer to a comprehensive framework of internal control when assessing the quality of financial reporting to determine that financial statements are being presented under General Accepted Accounting Principles, GAAP. The widely used framework is referred as COSO, Committee of Sponsoring Organizations of the Treadway Commission, sponsored by the following organizations American Accounting Association, the American Institute of CPA’s, Financial Executives International, the Institute of Internal Auditors, and the Institute of Management Accountants. COSO’s defines internal control as:

The President of the LJB Company has asked our company to do an internal control assessment of his company. This company has plans to go public in the near future, and the President wants to make sure that they are in compliance with current regulations. However, the President expressed that they have become very comfortable and possibly too comfortable employees, when it comes to safeguarding company monetary assets. The Internal Control Team (ICT) did find several discrepancies which will be addressed in this report.

With the development of accounting and the occurrences of accounting scandals, such as Waste management scandal, Enron scandal, and Worldcom scandal, internal control of a company has been paid unprecedented attention. For companies, effective internal control activities can help management to prevent and detect errors or frauds from accounting system so that they can have a better operating circumstance. In 2002, the United State Congress passed Sarbanes-Oxley Section (SOX) 404, which requires management to assess the effectiveness of a company 's internal controls over financial reporting (ICOFR) and requires external auditors to review management 's assessment, and then to provide their own conclusion related to the effectiveness of the ICOFR (Choi, Kim, Kwon, & Zang, 2010). The Sarbanes-Oxley Section 404 indicates the rising concern about accounting scandals in businesses due to ineffective internal control systems.

This report will describe the relationship between internal control practice and corporate governance, also the interaction of Corporate governance and internal control practice and its causes that can be improving the development of the company. Also evaluate the company which is WOODSIDE PETROLEUM LTD, to evaluate this company’s corporate governance statement communicates information about its governance and internal control practices. However, it also will examine two principles from ASX Corporate Governance, to weigh the pros and cons of the company.

Internal Audit is an independent, objective, assurance, and consulting activity designed to add value and improve operations. It helps accomplish objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.