Internal ControlsInternal controls are the protocol and methods by which a business or organization protects its assets and ensures the accuracy and reliability of its financial and accounting records. Strict internal controls are essential for any company that wants to have confidence in its shareholders and customers. Recent accounting scandals at companies such as Enron and Tyco have made it necessary to have strong internal controls and accounting procedures in place. As a result of these accounting scandals, new legislation and organizations have been developed to audit private companies and ensure that appropriate controls are in place. The Sarbanes-Oxley Act of 2002 (SOX) was passed after the Enron scandal made headlines on television. . It was clear that something had to be done to ensure that companies applied and followed good accounting principles and that they were checked often. SOX did just that: [it] “places more responsibility on company executives and boards to ensure that companies’ internal controls are reliable and effective.” (Weygandt, Kimmel, and Kieso, 2008) SOX increased the job demand for accountants and highlighted the importance of this department to an organization. Businesses have experienced increased productivity and efficiency since the implementation of SOX requirements, as the tighter controls have required businesses to audit the procedures and methods in which they record, organize and calculate information. Many deficiencies can be easily exposed with the new procedures because they are more thorough and require frequent audits. Companies that fail to comply with SOX may face prosecution or fines from the government. SOX created the public company A...... middle of paper ...... cts of internal controls so that employees who handle cash must be checked periodically to ensure that they do not Don't try to scam the employer. Internal controls are essential to organizations because they protect assets and ensure the accuracy and reliability of accounting practices. As we have seen in the past, companies like Enron and Tyco that fail to maintain proper internal controls see their stocks fall and lose consumer trust. Thanks to SOX, internal controls have been reinvented and more emphasis has been placed on their necessity. No system can ever be perfect because humans are responsible for every aspect of internal controls. What we can do is learn from the mistakes we have witnessed to maintain the effectiveness of internal controls, as they will constantly change due to technology and periodic penetration of controls..