According to SOX, the management of a US public company will personally be liable for the correctness of the financial reports and the effectiveness of its internal control. Each annual report on Form 10-K must contain a statement of the management’s responsibility to establish and maintain adequate internal controls and procedures for its financial reporting and a […]
Title I: Public company accounting oversight board (“PCAOB”): Definition of the organization and the field of functions of the oversight board over the reporting of the US enlisted companies. Title II: Auditor Independence: Regulations about the auditor’s independence including services not allowed to perform by auditors. Title III: Corporate Responsibility: Explanations and enlargement of the responsibilities of the companies like e.g. regulations about the […]
The Sarbanes-Oxley Act of 2002 (“SOX”) is a sweeping American law adopted in 2002 after the accounting scandals of Enron and WorldCom. Its aim is to make the reporting of companies more transparent and reliable mainly by setting up new accounting, auditing and controlling rules in order to enforce corporate governance. The final goal is to restore the confidence […]
Can a company receive an unqualified opinion on the audit of its external financial statements if it receives an adverse opinion on its internal control over financial reporting from its independent auditor? A company CAN receive an adverse opinion on the effectiveness of internal control and still receive an unqualified opinion on the financial statements […]
Control deficiency is a deficiency when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. Significant deficiency is a control deficiency or combination of control deficiencies that adversely affects the company’s ability to […]
Internal control over financial reporting is a process designed and maintained by management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). It encompasses the processes and procedures management has established to: a) Maintain records that accurately […]
A main role for the internal audit team is to evaluate the effectiveness of the internal control system and contribute to its ongoing effectiveness. With the internal audit team reporting directly to the audit committee of the board of directors and/or the most senior levels of management, it is often that this function plays a […]
An internal audit is a systematic review of an activity or department to accomplish one or more objectives stated in the internal audit policy. These objectives include: a) Determining the reliability and integrity of operating and financial information. b) Determining the degree of compliance with policies, procedures, law, and regulations. c) Assuring assets are properly safeguarded. d) Determining if […]
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
Internal controls should be proactive, value-added, and cost effective. In the best case scenario, poor internal controls result in increased bureaucracy, reduced productivity, increased complexity, increased time to process transactions, and increased non-value activities. In the worst case, poor internal controls interfere with the accomplishment of the unit’s goals and objectives and allow for misuse […]
