Internal control systems are recommended but not required to prevent fraud.

Question

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Internal control systems are not just recommended, but actually required to prevent fraud. The Sarbanes-Oxley Act of 2002 (SOX) requires publicly traded companies to have adequate internal controls in place to ensure the accuracy and reliability of their financial reporting. Other regulations and standards, such as the COSO framework and the PCAOB auditing standards, also emphasize the importance of internal controls in preventing and detecting fraud.

Internal Control Systems Are Recommended but Not Required to Prevent