Internal_Controls

When stockholders see that there is a deficiencies it makes them more timid to invest their money in the company. When a report comes back that the company had deficiencies the investors and stockholders see this as the company being weak. Material weaknesses in internal control provide warnings about potential future financial statement problems. With this many would rather not make the investment and may even sell their stock in fear of losing money (Zhang & Pany, 2008). Even with the rules and regulations to keep a business upfront and honest not all issues can be resolved. No matter how hard a business tries there will always be some limitations of internal controls. As much as a business or company would like there will always be people and people actions that they cannot control. As an example a company hires who they believe will do the best for the job along with their honesty and integrity. Some of the stores have their biggest theft from within the stores and from their own employees. The U.S Chamber of Commerce estimates that theft by employees costs American companies $20 billion to $40 billion a year (“Employee Theft Still Costing Business,” 1999). Companies and business have a large obligation to the investors, stockholders and creditors to make sure that there accounting and records are as accurate as possible. The government has designed regulations that are to help protect companies, investors and stockholders though there will never be a perfect way to stop all dishonest except to take all the precautions that are offered. The best way is to follow the principles of the internal controls which will protect the company and others with methods that are to safeguard their assets and make the companies accounting records as reliable and accurate as possible. (1) Establishing responsibility- at Wal Mart each teller us responsible for the cash count in their tellers this helps the company control parts of their company by individuals responsible for one specific area. (2) Using physical, mechanical, and electronic controls-This happens when a workplace has a computer or other electronic device that saves receipt. This is a way the company can track mistakes and is also used by the account to double check entries. (3) Segregation of duties-This is so the company can do a valid evaluation with duties not being duplicated. (4) Independent internal verification-This help the company find problems before they start. This is best done on a surprised basic so no records can be change. This will help a company from theft from within the company. As the examples show above the main purpose of the internal control principles is to stop problems before they can hurt a company. These principles if used correctly will help to safe guard the company’s assets and reliability of accounting records