May 22, 2011
The two primary goals of an internal control system are to safeguard assets and manage resources. This action by the organization, reasonably ensure that their specific goals and objectives will be met within compliance. This system consist of policies, measures and procedures designed to assist management with protecting the organization against waste, preventing and detecting fraud, inconsistencies, inadequacy, ineffectiveness, reliable and accurate accounting, evaluating performance and protecting both its tangible and intangible resources. It helps to minimize risks and they are an integral part of an organization’s financial and business policies. Internal controls are simply just good business practices.
The Sarbanes-Oxley Act was enacted on July 30, 2002. The bill was introduced and passed as a result of the then recent corporate accounting scandals by companies such as Enron, Tyco and Worldcomm, just to name a few. These very public scandals rocked the nation; since, they cost investors billions of dollars and challenged the faith that people once had in the America’s stock markets. This new Act helped to rebuild faith in a once loosely regulated system and repair some of the damage done by such greed and deceit. Some argue that the bill has reduced America's international competitive edge against overseas financial service providers (Wikipedia); but the bill was put in place to protect investors, shareholders and the general public alike by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws (SOX-online.com). The Public Company Accounting Oversight Board, or PCAOB, is the agency created to oversee the accounting firms that act as auditors for corporate companies. The consequences for non-compliance are fines, imprisonment, or both.
If a company announces deficiencies in its internal controls, the stock of that...