SOX were introduced to be known with its purpose. SOX is an act in protecting investors by improving the accuracy, and reliability of corporate disclosures made pursuant to the securities laws, and other purposes. New parts of the law are cited at 15 USC 7201. Many provisions is located at 78 USC because many of the provisions
Lastly, we will summarize the information presented with a synopsis of what internal control measures are recommended. Ultimately, LBJ wants to go public in the future and to do so the company must have strong internal accounting controls in place and utilized. LJB Company: Internal Controls Report. Per LBJ’s request, this report has been created to provide your organization with the tools necessary to implement a solid internal control accounting procedure system. Internal controls are extremely important accounting practices that help ensure the safety of your business from fraud and clerical errors.
3. According to Carmichael, why is it so important that the public have confidence in the independent auditors of public companies? With the horrific scandals of Enron and Worldcom it is important to rebuild the public’s trust in private auditors and that the findings of the auditors prove to be correct beyond a shadow of a doubt. With confidence in independent auditors of public companies, usefulness of the audit will be intact. Auditing methods change and improve when there is a need to restore this confidence.
A culture with strong ethical standards and code of conduct stemming from top management is key to preventing fraud; it is also cost-efficient to implement as a control. d. Audit Committee While not as cost-efficient as the other controls listed, there should be an audit committee appointed by the Board. It would be in charge of all financial oversight within the organization. For smaller organizations, they can attempt to recruit professional accountants to volunteer their time for the organization; in exchange, these accountants would be increasing their own reputation as well. Larger organizations might consider appointing an audit firm to audit their statements.
By following the guidelines of these principles; you can ensure that your company is not only meeting regulations but will also ensure that it is being run efficiently with minimum fraud. Using these guidelines, we’ll now discuss the problems with LJB Company and the changes that can be implemented to make the company’s internal control more efficient. The first issue that LJB needs to address is the fact that the
There has been significant evidence that the use of information systems, such as COMPSTAT, have allowed police departments respond to crime faster, and more efficiently. The police department in Santa Cruz, California tested out this method and found it to be quite effective in preventing and deterring the instances of crime. Mr. Friend, a crime analyst at this police department stated “We’re facing a situation where we have 30 percent more calls for service but 20 percent less staff than in the year 2000, and that is going to continue to be our reality,” Mr. Friend said.
Sarbanes-Oxley Act Sarbanes-Oxley is a United States federal law, which is also known as the public company accounting reform and investors protection act and corporate and auditing accountability and responsibility act. Sarbox or Sox are shorter names given to the company. Paul Sarbanes (US Senator) and Michael G. Oxley (US Representative) are the ones who support this act. This act is intended to protect investors by improving the precision and consistency of corporate disclosures made pursuant to the security law. It is also there to strengthen audit committees and to create responsibilities for publicity traded corporations, accounting firms and regulatory agencies.
In conclusion, the Sarbanes-Oxley Act is an integral part of internal control. Because of Section 404, the CEO’s and chief financial officer are now held accountable for the accurate filings of its financial statements, or face stiff penalties. In 2007, SEC Chairman Christopher Cox stated, “Sarbanes-Oxley helped restore trust in U.S. markets by increasing accountability, speeding up reporting, and making audits more independent.” (Sarbanes-Oxley Act, 2010, section 6, para. 2). Because of SOX, investor’s confidence has improved and financial statements are now more accurate and
The intention of SOX is to restore the confidence of the public and investors through the enhancement of corporate governance, improving the oversight of auditors, focusing the attention of companies and auditors on internal controls, and strengthening the penalties for noncompliance (Deloitte, 2004). Internal controls are essential for establishing corporate governance. In sections 302 and 404 of the Sarbanes Oxley Act, emphasis is placed on the importance of internal controls on corporate governance within an organization. In order to address internal control issues, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued control guidelines called the Internal Control-Integrated Framework. “COSO was formed in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, an independent private-sector initiative which studied the causal factors that can lead to fraudulent financial reporting.