Safeguarding Assets: The SOX Act Essay

521 Words 3 Pages
What is internal control? According to University of Phoenix, Axia College Internal Control and Cash (2009), internal control is all of the related methods and measures adopted within an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records. The primary reasons for internal control are help companies protect their investments and merchandise against theft from everyone, including employees and to make sure that the accounting is done correctly and truthfully.

There are six principals of internal control that apply to most enterprises. Establishment of responsibility- gives only one employee responsibility over a certain task. Someone is less likely to steal if they are the only
…show more content…
Independent Internal Verification- when companies review data that was prepared by employees, by having someone not associated with the employees that prepared the data either periodically or by surprise.

The Sarbanes- Oxley Act of 2002 helps to make sure that companies are complying with internal control. If a company fails to keep track of their internal control, then they are subject to fines or imprisonment. The act also gives the companies executives the responsibility to make sure that the company has reliable internal controls. Under one part of the law, companies are required to develop sound principals of control over financial reporting and must verify that the controls are working properly (University of Phoenix, Axia College, 2009). Public Company Accounting Oversight Board also helps companies ensure that their finances are in order, because they established auditing standards and regulates auditor activity.

If a company has deficiencies in its internal controls the stock price would probably fall, because no one wants to support a company who is lacking something. Depending on what the company is missing it cause numerous monetary setbacks and there is not anyone who will purchase something for a high price, knowing that the company could eventually go under.

Companies should take reasonable assurance of proper safeguarding of their assets. An example of doing this would

More about Safeguarding Assets: The SOX Act Essay