...companies required have an adequate system of internal control, and company officers who fail to comply are subject to fines and even imprisonment. SOX section 404 requires companies to include report of management on the company's internal control over financial reporting in their annual reports. In addition, SOX requires companies to develop sound principles of control over financial reporting and continually assess that these controls are working. Finally, external auditors are required to present a report attesting to the level of internal control. The internal control requirements of SOX mean that external and internal auditors must understand how internal controls are designed and operated so that they can be assured that the controls have been implemented.

What Are Internal Controls?

Although internal controls have been an integral part of business for centuries, confusion exists over the exact meaning and scope of the term. Historically, the term internal control applied to the domain of accounting. The term was applied to the effort to safeguard assets and ensure the accuracy of the accounting records. More recently, the definition of the term has evolved into a broader concept that extends beyond the accounting functions of an enterprise. The Committee of Sponsoring Organizations of the Treadway Commission (n.d.) defines internal control as a process, affected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

* Effectiveness and efficiency of operations

* Reliability of financial reporting

* Compliance with applicable laws and regulations.

Before tuca Pacioli

Traditionally, the history of accounting begins with the invention and recording of double-entry bookkeeping focusing upon Luca Pacioli as the author of the first text (published in 1494) describing basically the same accounting cycle we learn today. But this history omits the centuries-old evolution of accounting systems beginning with the earliest known records of commerce in the Mesopotamian Valley in about 3500 BC and continuing through the Middle Ages.

Interestingly enough, the earliest form of writing...

NOTE: All illustrations and photos have been removed from this article.



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