Internet Controls
Vanessa King
July 29, 2012

Internal controls are used within an organization to help safeguard assets and enhance the reliability and accuracy of accounting records. I think internal controls are essential for any public company to function. Safeguarding assets includes stopping robbery, employee theft, and unauthorized use and is very important for an organization. Minimizing the risk of unintentional mistakes, or errors as well as intentional mistakes or irregularities within the accounting process is what enhancing the accuracy and reliability means. It is required by law to monitor the different models of internet controls and the main reason for internet controls is so a company can monitor its actions and procedures. Physical safeguards include cameras, physical barriers, locks, and anything else to protect property. IT Security helps ensure that restricted documents are obtained by only authorized personal by using a lock, security code, or an employee ID as identification. I work at home and have to use a password, and a RSA token, which is a six digit number that changes each minute and helps my company make sure that I am the only one logging in because I have my password and the token. The two primary goals of internet controls are to safeguard assets from theft and unauthorized use, and to enhance the accuracy and reliability of company accounting records to avoid errors or irregularities in the accounting process. Human elemant is also a factor to consider with interna controls because if an employee is tired, carless, or overwhelmed this can cause an error for the company that internal controls could have solved.

The Sarbanes-Oxley Act (SOX) has many regulations to ensure the maintenance and creation of the internal controls and if companies do not apply there are severe penalties. The government passed the SOX in 2002 to force “companies to pay more attention to internal controls” (Weygandt, Kimmel, and Kieso, pp. 341). This was said in response to several corporate scandals that either involved corrupt business practices, poor accounting, or bad public financial statements. Such scandals include Enron, Tyco International, World Com, and Adelphia. The4 most famous of the scandals mentioned was Enron because Enron filed bankruptcy and hired a separate accounting firm that was the company’s ultimate downfall. Stocks dropped and people started to realize that Enron was not a profitable business based on equity but because of fraud and lies and no one wants to be associated with this kind of company that embezzled money for short-term financial goals. Investors were smart enough to bail which made the prices of stocks decline. Using and implementing internal controls helps management adapt with economic changes and compete with competitiveness while making sure laws are abided by.

The segregation of duties creates a system of checks and balances by making sure that no two people have the same responsibility within the company.