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Internal Controls Essay

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Internal Controls Essay
Internal Controls Paper
FIN/324
University of Phoenix
November 2, 2005

Internal Controls Paper When it comes to the internal controls of firms and enterprises, executives are constantly keeping a close look on the accuracy and effectiveness of these controls along with seeking ways to better them. According to COSO (2004) the implementation of internal controls helps guide companies in reaching towards their profitability goals, the accomplishment of their mission statement, and helps minimize any unexpected events that may occur. This analysis will: (1) describe the importance of internal control programs, (2) identify effective internal control techniques, (3) illustrate the relationship between ethics and internal control techniques, and (4) describe the importance of the Sarbanes-Oxley Act.
The Importance of Internal Control Programs Effective internal controls are the foundation to a safe, sound, and successful enterprise. A properly designed and consistently enforced system of internal controls helps a company 's board of directors and management safeguard their resources and produce reliable financial reports. According to COSO, the three primary objectives of an internal control system are to ensure; efficient and effective operations, accurate financial reporting, and compliance with laws and regulations. Internal control programs can help managers in many ways such as measure performance, make decisions, evaluate progress, and limit risks. An effective control program can also help with avoiding surprises by detecting mistakes caused by factors such as personal distraction, carelessness, fatigue, errors in judgment, or unclear instructions in addition to fraud or deliberate noncompliance with policies. According to the American Institute of Certified Public Accountants (AICPA), effective and well designed internal control systems are still subject to execution risk. This means that human beings still must execute most control systems and even


References: COSO (2004). The Committee of Sponsoring Organization of the Treadway Commission Retrieved November 2, 2005 from www.fei.org/coso/rfbookstore/pud AICPA (2005). American Institute of Certified Public Accountants. Retrieved November 2, 2005 from www.aicpa.org/nolimits/ships
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