chapter_8_for_class - 8-1The Sarbanes-Oxley Act of...

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Unformatted text preview: 8-1The Sarbanes-Oxley Act of 2002(referred to simply as Sarbanes-Oxley) applies only to companies whose stock is traded on public exchanges. Its purpose is to restore public confidence and trust in the financial statements of companies. Sarbanes-Oxley requires companies to maintain strong and effective internal control.8-2Internal controlis broadly defined as the procedures and processes used by a company to:1.Safeguard its assets.1.Process information accurately.1.Ensure compliance with laws and regulations.8-3Employee fraudis the intentional act of deceiving an employer for personal gain.8-41.Control environment2.Risk assessment3.Control procedures4.Monitoring5.Information and communicationManagement is responsible for designing and applying five elements of internal control to meet the three internal control objectives. These elements are as follows:Five Elements of Internal Control8-5Thecontrol environmentis the overall attitude of management and employees about the importance of controls.Control Environment8-61.Managements philosophy and operating style2.The companys organizational structure3.The companys personnel policiesFactors That Influence the Control Environment8-7...
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chapter_8_for_class - 8-1The Sarbanes-Oxley Act of...

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