Question

Internal control systems are:
Multiple Choice
a) Developed by the Securities and Exchange Commission for public companies.
b) Developed by the Small Business Administration for non-public compantes
c) Developed by the Internal Revenue Service for all U.S. companles.
d) Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock Is traded on an exchange (a public company)
e) Required only if a company plans to engage In Interstate commerce.

Answer 1

Answer:

Option D. Required by Sarbanes-Oxley

Explanation:

Internal control system is defined as the process for assuring an organization's objective in operational efficiency and effectiveness, along with this it also help in reliable financial reporting, compliance with laws, policies and regulations. In wider perspective internal control system controls risks to an organization.

At organizational level it provide timely feedback over the achievements of strategic goals, whereas, at specific transaction level it provide specific actions to achieve a specific objective.

Internal control system have five components:

1. Control environment, hence, sets the tone for an organization.
2. Risk assessment through identification of relevant risks.
3. Information and communication which supports the identification and exchange of information.
4. Control Activities which help in ensuring management directives.
5. Monitoring processes is used to access the quality of internal control.