INTERNAL CONTROLS
JANINE LEWIS
XACC/280
DECEMBER 8, 2013
JOSE RODRIGUEZ

INTERNAL CONTROLS Internal controls are methods that companies put in place to protect themselves from errors, internal fraud or corruption. The methods consist of review, checks and balances, and procedures that make sure a company’s business is being conducted orderly and efficiently. They also ensure that the policies and procedures that are put in place are being adhered to. Internal controls are necessary for many reasons; however there are two primary goals. One is to protect the company and prevent theft, errors, fraud, and unauthorized use of resources and assets. The other is to detect and quickly reconcile any errors that may occur, and ensure that accounting and financial data is accurate and reliable. The Sarbanes-Oxley Act of 2002 was put in place as a result of the many corporate scandals that has happened. Under this act, companies are required to have an internal control system in place. If a random or scheduled audit discovers a company does not, they are subject to fines and possible jail time. SOX have affected internal controls in several different ways. In one way, it keeps a continuous watch over a company’s internal control system to ensure that the current methods continue to be reliable and effective. For example, over time, a company may change its computer system, its reporting method, or other ways pertaining to their finances. From this, any documented control principles may need to be reviewed, approved and updated. This constant review ensures that any control principle never become outdated. Another way it has affected internal controls is by holding corporate executives responsible for control breakdowns. As long as the executives of a company and the board of directors are regularly reviewing the