Internal Controls Essay

1010 Words Jul 6th, 2013 5 Pages
Internal Controls

Internal controls are a necessary part of any company. They are comprised of all the methods and measures used by a company to one of two things. (Wetland, Kieso, & Kimmel, 2003,) They either safeguard a companies assets from things such as theft or unauthorized use, or they help to enhance the accuracy and dependability of a companies accounts and records. This second use helps to ensure that fewer errors are made wither intentional or unintentional. Without internal controls, there would be a lot of room for mistakes that could potentially destroy a company. For example, accounts could be stolen from and manipulated or a simple calculation could be missed, upsetting the entire balance of the accounts. These internal
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Internal controls help to establish a companies ability to avoid mistakes as well as show their accounts without mistakes or lies. This gives investors a confidence in the company because they feel tha the company can be trusted and the money they invest will not be wasted. For this reason, a companies internal controls are incredibly important. If a company were to announce that they had deficiencies in the internal controls, the price of its stock would definitely take a hit. Internal controls ensure that accounts are correct, employees are dividing responsibilities and other important things such as the company being audited to ensure correct finances. If it were to come back that a company was lacking in their internal controls, people would lose their confidence. They would feel worried in the companies ability to handle their finances well, including any investments that have been made. When a company has deficiencies in its internal controls, that means that the company is not being monitored the way that it should be, giving the possibility that there could be large issues withing the walls of the company that are unknown to the public and the investors. These unknowns can mean a loss of money to investors which usually means that they will not invest. When investors do not invest, the price of the companies stock falls due to high supply and low demand. Internal controls can have many limits. Depending on the company

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