ACCT 2101 Lecture 4: Chapter 4
Document Summary
Financial accounting misstatements: errors accidental errors in recording transactions or applying accounting principles, fraud a person intentionally deceives another person for personal gain or to damage that person. Accounting scandals in the early 2000s prompted passage of the sarbanes-oxley act (sox: enron and worldcom, sox required better internal controls. Internal controls attempt to eliminate the opportunity element of fraud: safeguard the company"s assets. Improve the accuracy and reliability of accounting information: monitoring: continual monitoring of internal activities and reporting of deficiencies is required. Monitoring includes formal procedures for reporting control deficiencies: control activities are the policies and procedures that help ensure that management"s directives are being carried out. It includes formal policies related to management"s philosophy, assignment of responsibilities, and organizational structure. Limitations of internal control: an effective internal control system can"t turn a bad employee into a good one.
