Internal controls are an integral part of a business operation because of the extreme importance of assets. Assets are basically an economically valued item owned by an individual or corporation, which most often has a direct conversion rate to cash. Examples are cash, securities, accounts receivable, in-stock product, business equipment, real-estate, cars, and other valuable property. Assets are business resources which could lead to being able to generate future services and benefits. Operational goals of profitability are achieved through a company’s assets. These are the resources and possessions which allow businesses and corporations to provide goods and services to generate profits. Assets can be current assets like cash, accounts receivable, inventory, and prepaid expenses that generate profits or gains within the current accounting period. They also can be long-term items such as property and business equipment. Since these assets are a businesses’ or corporations’ most valuable resources, they must be protected from theft and unauthorized use by creating, and implementing, a company “internal controls system.” Internal controls are procedures and protocols by which a company conducts internal monitoring. Through self-monitoring, a company increases the chance of success. Also, these controls systems ensure the liable parties invested in companies that their business are running efficient. Internal controls form an integral part of any business. In laymen’s terms, it is a system of internal controls which minimize errors in the accounting records, and deter fraud and embezzlement. Because these internal controls protect against many illegal happenings in businesses, they are rightfully required by law.
The Sarbanes-Oxley Act (SOX) of 2002 was passed after numerous corporate scandals. It required companies to be more much more thorough to implementing and checking their...