A Further Understanding of Internal Controls

The Sarbanes Oxley Act of 2002 mandates that management of public companies will evaluate the effectiveness of its internal control system over its financial reporting. Specifically under section 404 of the Sarbanes Oxley Act, it delegates that management needs to provide statements in its annual report stating that:

1-      “Management is solely responsible for the establishment and maintenance of a solid system of internal control”      and

2-      “Management’s  assessment of the effectiveness of its internal control system”

Auditing Intensive Exam

Auditing is a very important subject in the accounting industry. Majority of people's perception of a CPA means they will be performing tax services only. That may be true when it  is tax season, however CPA's are authorized to audit a company's financial statements and render an opinion. Auditing not only focuses on a company following GAAP rules on their financial statements, however also tax rules on their tax returns.

Reviews & Compilations

An auditor can perform both a review and compilation as a professional service. Both are very similar to an audit; however require less assurance and extensive work. A compilation normally is done for a nonpublic company. Many nonpublic companies can be really small stores, or businesses that do not have an accounting department; therefore a CPA can assist in compiling the financial statements. A review can be offered to both public and non-public companies. A review is somewhat in the middle, both nonpublic and public companies may pay a CPA to perform a review service. A public entity usually requires a review for all interim financial information.