Acct 101 Chap 5

Acct 101 Chap 5 - audits-The Sarbanes-Oxley Act includes a...

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Acct 101 – Chap 5 Internal controls are policies and procedures designed to provide reasonable assurance that a company’s objectives are accomplished. Public companies a re subject to rules of the Sarbanes-Oxley Act of 2002 requiring them to report on the status of their internal controls. Purposes of internal controls include: - ensuring operations are performed efficiently and effectively - management’s objectives are achieved - assets are safeguarded - financial reports are accurate Limitations of internal controls include: - collusion Techniques of internal control include: - separation of duties - having high quality employees - clear procedures - clear lines of authority and responsibility - adequate documentation - physical safeguards and controls, such as locked areas. - Regular reviews or performance and regular reconciliations of recorded data to outside evidence. Public accounting firms perform “external audits” of companies: - SEC rules require publicly traded companies in the U. S. to have annual
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Unformatted text preview: audits-The Sarbanes-Oxley Act includes a number of rules related to auditing that are intended to help auditors stay independent of their clients. These include: o restrictions on what kinds of nonaudit services auditors can provide to their audit clients. o Auditors must be hired by audit committees of the board of directors, not company management-Many other companies choose to have audits-There are four categories of auditors opinions o Unqualified (clean) the financial statements present fairly, in all material respects, a companys financial position. o Disclaimer the auditor is unable to form an opinion on whether the financial statements are fair o Adverse The auditor believes the financial statements do not present the companys position fairly. Qualified The financial statements are fairly presented, except for certain identifiable matters that the audi...
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This note was uploaded on 03/31/2011 for the course ACCT 101 taught by Professor Wang during the Spring '11 term at Adelphi.

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Acct 101 Chap 5 - audits-The Sarbanes-Oxley Act includes a...

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