Internal Controls Essay

924 Words May 17th, 2013 4 Pages
Internal Controls XACC/280
April 8, 2013

There are rules that have to be followed when documenting financial information in accounting. Internal controls are methods used by a company to make sure their finances and accounting information meet the accurate level of integrity. Internal controls operate well when they are used in multiple levels of the company and also in different departments. A lot of companies have standard practices when it comes to financial integrity. Internal controls are also used to protect a company from incorrect data, fraud, and preventing anyone from abusing the finances. All financial records are being recorded and tracked to ensure accuracy. The Sarbanes-Oxley Act of 2002 was put in place
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The Sarbanes-Oxley Act makes it very clear the responsibilities that are expected of a company and its executives when it involves financial reports. This act advises them of the consequences if they decide to lie about their reports or lie to investors or the public regarding their financial status. In order for a company to produce financial reports that are reliable and prevent financial fraud they must keep effect internal controls. If a company is not able to have effective internal controls then this may cause a fall in stock because the internal controls limit the unethical behavior and mistakes that may occur in a financial reporting period. If this information is not correct and they are not following the standard rules then they may be perceived as a company that lies to the public and also to its investors. Since downfalls such as Enron society takes investing a lot more serious and it is visualized in a different way. These days before an investor will buy stock they will thoroughly look over and analyze a company’s financial records. There are studies put in place that show that companies who disclosed their financial records had a lower decrease in stock prices than those who did not make theirs available. Internal controls are processes and

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