HW2.docx - HW 2.1 Internal Control Use your own words to...

This preview shows 1 out of 3 pages.

HW 2.1: Internal Control Use your own words to explain: a) What are some of the problems that arise when companies engage in accounting fraud? When a company engages itself in the accounting fraud, then it starts to lose its financial stability and the confidence of its stakeholders. There are different types of accounting frauds; some frauds are committed to deceiving shareholders and investors. On the other hand, some frauds are intended to cheat the stoke market. Both of these accounting frauds are very dangerous because it damages the financial structure of the company internally. The companies show a healthy fabricated financial position through financial deception; however, it cannot be sustainable for a long time and hence the financial structure of the company suddenly breakdown. b) What’s the Sarbanes-Oxley act and why is it important? The Sarbanes-Oxley Act predominantly focuses on the ethical conduct of the company. This act encourages organizations to create and effective internal control system that can raise the confidence level of the shareholders, investors and other stakeholders. This act is very crucial because of it extents the requirements of generally accepted accounting principles (GAAP). The rules and regulations prescribed within the GAAP do not compel the organizations to behave ethically. As an effect of this, it was not possible to ensure the growing and progressive culture within the organization. That is the reason; the Sarbanes-Oxley Act is very important from the standpoint of ethics. c) What is internal control in a business and why is it necessary? The internal controls within the business are very imperative. The internal control can be the complete procedure or set of actions those prevent accounting frauds within the company. The practice of interlinking the different accounting operations are considered as the internal control. Because in such system the transactions and financial working recorded by one authority are checked and analyzed by the other authority. It helps the management to detect the inappropriate accounting practices in the early stages. On the other hand, the internal audit is also very useful for preventing the accounting frauds. d) What are the three main objectives of internal control? Protection of business assets. Managing and processing information safely. Ensuring business compliance with the rules and regulations.
Image of page 1

Subscribe to view the full document.

e) What are the five elements of internal control? The five elements of internal control are; risk assessment, control assessment, control procedure, monitoring and information, and communication. The five elements of internal control are very crucial, and these elements provide a solid ground for having an effective and operational internal control within the companies.
Image of page 2
Image of page 3
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern