INTERNAL CONTROLS
Assignment U03A3
Joseph A. Mendoza
MBA 6014
Capella University

Introduction When a company becomes public, opportunities open up for such company to grow, expand , and have global presence. With these opportunities, come responsibilities toward the shareholders. Those who choose to invest based on the strength and possibilities of the company. For years, markets were shrinking responsibilities, and shareholders suffered through investments made on bad information. Regulations like Sarbanes-Oxley were passed to make sure internal controls were defined to bring accountability into the boardroom and executive suites. (Volcker 2004)
Cost Benefit of Internal Controls Cost of regulatory compliance and the consequences of a mistake continue to rise. Companies are willing to do what it takes to make sure the organization is in line. Although there are two sides to regulation, one side pushing for less of it due to the increasing expense to stay compliant, while the other side feels it is unnecessary. The trend is to comply however, is to comply, because the cost of non-compliance is still higher that the cost of compliance. Companies are placing more emphasis on internal controls since the Sarbanes-Oxley corporate governance of 2002. They are in search of a higher level strategic accounting officer. This is a clear response to the dynamic changes in regulation that continue to be brought upon organizations. Since 2005, the number of large companies warning regulators that their prior financial statements might not be valid, dropped 90% (Johnson 2015). This indicator shows that internal controls are working.

Implications of Internal controls Under the new rules, the burden clearly is on management to perform a meaningful, thorough evaluation of the company's internal controls over financial reporting. This evaluation is