Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 15

The Institute of Internal Auditors states in its November 2005 issue of “The Tone at the Top” that businesses can rely on an industry standard, Internal Control – Integrated Framework, to comply with certain provision in the Sarbanes-Oxley Act by assessing and enhancing companies’ internal control systems. How do effective internal controls help an organization to promote efficiency, minimize risks, help ensure the reliability of financial statements, and comply with regulations?

Step 1 of 2

Internal control:

Internal control is the process designed by the management to achieve the following objectivities:

• Effectiveness of the operations and rescue the risk of assets loss.

• Reliability of financing and non-financing external and internal reporting.

• Follow the applicable rules, regulations, and laws.

Financial statement:

The financial statement of a company is the record of past year activities. There are many financial statements like cash flow statement, balance sheet, income statement, profit and loss account, etc.