Internal Controls

Assignment: Internal Controls
Robin Toups
July 25, 2010
Kimneye Cox

    Internal controls are an integral part of a business operation because of the extreme importance of assets. According to the InvestorWords (2010) website assets are defined, “Any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, real estate, a car, and other property.”Assets can be defined as business resources that are owned to generate potential services and benefits. Operational goals of profitability are achieved through a company’s assets. In other words, these are the resources that allow organizations to provide goods and services to generate profits. Assets can be current assets such as cash, accounts receivables, inventory, and prepaid expenses that generate benefits within the current accounting period. They also can be long-term items such as property or equipment. 
      Since assets are an organization’s most valuable resources, they need to be protected against theft and unauthorized use through creating and implementing a company internal controls system. Internal controls are actions and procedures by which a company conducts internal monitoring. Through self-monitoring, a company can increase the chances that certain goals will be met and ensure efficiency of operations and legal compliance. Internal controls form an integral part of any business. Simply, it is a system of internal controls serving to minimize errors in the accounting records and to deter fraud, embezzlement and theft by employees, customers and vendors; not to mention internal controls are required by law.
      The Sarbanes-Oxley Act (SOX) of 2002 was a law that was passed after numerous corporate scandals. According to Sarbanes-Oxley Act 2002 (2006), “The Sarbanes-Oxley Act of 2002 is mandatory. ALL organizations, large and small, MUST comply.” The...