Maintaining the integrity of these accounts is very important. Many companies today suffer a lot of loss from disgruntled employees, customers and competition with other companies. A number of companies have had to file bankruptcy with employees, investors and consumers suffering the most from the egregious and fraudulent activities. The effects of these companies’ mismanagement has been so troubling that congress passed legislation in 2002, called the Sarbanes-Oxley Act of 2002 (SOX); which requires public companies to have established internal controls and to have them published with the Securities Exchange Commission (SEC) (pg.132 Edmonds). This act is only a requirement for US publicly traded companies. However, private companies should also be protecting themselves from fraud and preventing errors and some do follow the Enterprise Risk Management framework. Internal controls are recommended for all companies. Personally, I see it as 2 groups of controls: employees and operations. The most common control activities are the following:
Separation of duties-It is important that not one individual in a company has all of the control; instead duties should be separated as a way of checks and balances. There should be different individuals in the authorization, recording, and custody of assets functions.
Quality of employees, required absences, and performance evaluations-Employees should be properly trained and should be able to handle various…