From the year 2000 to 2001 there were lots of corporate scandals in the US that made investors lose faith in the financial markets, and to some extent, it was reflected on the economy. Hence the Sarbanes Oxley Act was enacted in 2002 to restore investors’ confidence in the financial markets once more. The act required the companies to strengthen and put more on their audit committees, internal control tests to be performed, directors and officials to be made liable for the accuracy of financial statements and strengthen on the disclosure (“Internal Control,” 2017).
Internal controls are the measures put in place by a company to prevent employees from stealing assets or fraud, ensuring financial integrity. The basic principles that are used to assess the internal controls include the segregation of duties, proper authorization of transactions, control of assets and records physically, adequate documents and records, and independent checks of performance(“Internal Control,” 2017).
Internal Control. (2017). Basic Principles Of Internal Control. Retrieved from http://www.auditnet.org/audit-library/auditnet-controls-primer
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