Internal controls are a critical aspect of running a business in a way that mitigates exposure to fraud and undue risk. The passage of the Sarbanes-Oxley Act of 2002 introduced stringent requirements and penalties for corporations to implement robust internal controls.
The Act came to be after the cycle of greed-based accounting scandals that were in the news back in the late 90’s and early 2000’s… Enron, Tyco, Healthsouth, etc. The result of all those scandals was a vast distrust of financial reporting in general, and the Sarbanes-Oxley Act was intended to restore the public trust in this country’s large corporations.
Cash is hands down the most important asset a company can own. It is also the most exposed to risk, fraud, etc. Strong internal controls related to managing cash are necessary to manage the risk. This is what you’ll cover in Chapter 7.
0 comments