Internal control is the process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations. 3. Section 404 of Sarbanes-Oxley requires a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting by public companies. This section includes an assessment of the controls and the identification of the framework used for the assessment. The framework established by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992 is the de facto standard by which SOX compliance is judged.
Clarke Cummings, Keller Graduate School of Management 5/31/2012 Case Study 2 – Internal Control Report to the LJB Company Under the Sarbanes-Oxley Act, all public traded United States corporations are required to maintain an adequate system of internal controls. Under this law, executives must ensure these controls are reliable and effective. As with any business, the transformation a private business to public one requires extensive planning and preparation. Therefore, as your advisor, I recommend LJB should reevaluate the cost of going public versus the benefit of being a public traded company, since LJB is a relatively small sized company in terms of its employees. If LJB decides to issue stock, it is wise to answer the following questions: (1) how many shares should be authorized for sale; (2) how will LJB issue the stock; and (3) what value can be assigned to the stock once it is issued.
# 1-23 Question from Modern Auditing Textbook ACC/491 March 20, 2013 1-23 Question from Modern Auditing Textbook 1-23 (Organizations associated with the public accounting profession) Several private and public sector organizations are associated with the profession. Listed below are activities pertaining to these organizations. Required Indicate the organization or organizations associated with each activity. 1. License individuals to practice as CPAs.
The expected result of this project is to have one set of international standards that domestic and worldwide companies can use to prepare their financial statements. The combined effort of the FASB and IASB will be a conceptual framework that will provide a universal structure for creating financial reporting standards. The FASB framework and the IASB framework are quite similar, which makes the convergence project possible. The major difference between the two is that the FASB has more detailed guidance, which allows future development of standards. The IASB’s framework leaves the interpretations up to the user of the information.
They are not required to have knowledge and expertise to start and maintain a successful business. A business model is usually evaluated by a bank or other financial institution that the company acquires capital from. An auditor is required to uphold integrity and has a responsibility to the stockholders to maintain competence and independence. All of this must be achieved while examining sufficient, pertinent evidence to obtain reasonable assurance as to the material fairness of the client's financial statements. This evidence supports what has happened thus far in the client's business.
Introduction The intention of Sarbanes–Oxley Act (2002) was to avoid probable scandals and restore shareholders’ assurance. It was enacted as a response to many corporate and accounting frauds like Enron, WorldCom and Tyco International. Role of Sarbanes-Oxley in corporate accounting and reporting: One key section of the act conditions for use of non-US GAAP or proforma financial information and internal control over financial reporting. Companies registered in the US should disclose financial reports in accordance with GAAP with a reconciliation of the differences between this and the non-GAAP measure. Internal controls over accounts reporting include procedures that concern to the safeguarding of records that correctly and fairly reveal the transactions and dispositions of the assets of the issuer.
The AICPA established auditing standards for private companies. Audits for US public and private companies are based primarily on standards previously established by the ASB. When a reference is made to a Statement of Audit, standards SAS issued by ASB the standards applies to both private and public companies unless otherwise noted. 2.10 GAAS have been criticized by different sources for failing to provide useful guidelines for conducting an audit. The critics believe the standards should be more specific to enable practitioners to improve the quality of their performance.
Case 2-2. a. i. The Conceptual Framework Project is an attempt by the FASB to develop concepts useful in guiding the board in establishing standards and in providing a frame of reference for resolving accounting issues. Over the years this project first attempted to develop principles or broad qualitative standards to permit the making of systematic rational choices among alternative methods of financial reporting. Subsequently the project focused on how well these overall objectives could be achieved. The FASB has stated that it intends the Conceptual Framework Project to be viewed not as a package of solutions to problems but rather as a common basis for identifying and discussing issues, for asking relevant questions, and for suggesting avenues for research.
The general accepted accounting principles regulate and standardize preparation of financial reports which are distributed to the public. Companies are required to comply with GAAP when presenting external financial reports (Kieso, D. E., Weygandt, J. J., & Warfield, T. D, 2007). An accrual basis accounting system is different from just tracking incoming and
The basis of this case study is to disagree with the question of whether or not accounting information systems played a role in the Enron and Bernard Madoff fraud cases. All organizations should have an adequate, effective, and efficient accounting information system in tack. In my opinion, the Enron and Bernard Madoff fraud cases had the classic signs of pure greed; the accounting information systems were perhaps manipulated, ignored, and compromised to financially suit the personal gains of the individuals involved and did not assist with the cases. An important part of the accounting information system is its internal control system. Internal controls are methods and procedures used by an organization to safeguard assets, authorize transactions, and ensure accuracy of the accounting records.