Sociology

Internal control by
The Sarbanes-Oxley Act 2002 is a federal law in United States and was enacted as away of responding to certain accounting scandals. The accounting scandals mostly affected investors who lost billions of dollars due to collapse of security markets. The Act provides tough requirements that must be adhered to by any registered accounting firm. The requirements include internal control process that is provided for in sections 302 and 404. Section 404 basically provides for effective procedures and controls that must be evaluated by external auditors during evaluation of financial reports. The provisions of the Act require that each company should provide an annual report that must contain internal control report. The report must state the responsibility of management to maintain and establish strong internal control measures. In addition, it must contain assessments that show the effectiveness of the companys internal control procedures.

Implementation of sections that provide information about internal controls is very expensive. However, the implementations provide requirements that are used to put in place measures that ensure that financial statements are prepared and presented as per generally accepted accounting principles. A company must allow its financial reports to be audited by qualified auditors so as to prevent frauds and manipulation of records by accountants for selfish benefit. The benefits of internal controls to any business entity therefore offset the expense of implementing certain sections in Sarbanes-Oxley Act. This is because, when a company has good working internal controls put in place, it becomes very easy for an auditor to execute his or her duties thus reducing the cost of auditing to an organization. It is therefore, very important for any company to incorporate internal controls that are in operation through out a fiscal year.