Describe how the credit crisis may have adversely affected many people beyond homeowners and mortgage companies. Do you believe the impact of the credit crisis is still being felt today? Why or why not? Are we headed in the direction of another credit crisis? What indicators hint at what could happen in the future?

Part 1 Referencing this week’s readings and lecture, discuss the purpose and components of an effective internal control process.  How do the components of the internal control process assist management with compliance of the Sarbanes-Oxley Act of 2002? Part 2 Compare and contrast the differences between preventive, detective, and corrective internal controls in a modern business organization.  Provide a practical example of each type of control. Lecture According to Musvoto (2011), “accounting is regarded as a measurement discipline” (p. 97). Our journey continues with one of the methods for displaying a representational model for the way information is communicated. Probably the most common technique, flowcharts demonstrate the flow of data (Bodnar & Hopwood, 2013, p. 38). Flowcharts use symbols to represent steps in the process of communicating data. Common symbols are used in the communication process so that a consistency exists between the creators of data and readers of the data. During this week’s written assignment, you will select one accounting transaction process and create a flow chart that fully communicates the process of that transaction to the reader. It is important to remember that an organization’s system of internal controls play a dominant role in the transaction process. Because of Section 404 of the Sarbanes-Oxley Act (SOX), management is responsible for assessing the effectiveness of an organization’s system of internal controls. Internal controls provide specific standards for actions taken within an organization to regulate and direct activities of the organization (Bodnar & Hopwood, 2013). According to Bodnar and Hopwood (2013) there are three primary purposes of internal controls: (a) reliability, (b) effectiveness and (c) compliance. Financial reports, especially those for publicly traded corporations, must be reliable to both internal and external stakeholders. Reliability reduces the risk of inaccurate data providing effective reports that enable the reader to make educated decisions. Finally, compliance with federal and state financial reporting regulations reinforces both reliability and effectiveness of financial reports. Sarbanes-Oxley Act of 2002 (SOX) was implemented in response to a number of accounting scandals that occurred at the beginning of the new millennium (Kay & Ovlia, 2014). Congress determined that billions of dollars in net worth was lost because of improper financial reporting creating a loss of public confidence in corporate America. SOX provides several requirements intended to rebuild public confidence and trust in the country’s biggest companies. In addition to Section 404 of SOX, management has other responsibilities related to Sarbanes-Oxley. Section 302 focuses on corporate officer responsibility for financial reporting mandating that the chief executive officer and chief financial officer personally certify that annual financial reports do not contain untrue, misleading, or omitted data or information that could adversely affect the reliability and effectiveness of the final reports (Kay & Ovlia). Chief among the requirements of Section 302 is the maintenance of a system of internal controls intended to ensure the accuracy of financial reporting. Romney and Steinbart (2015) believe that internal controls perform three critical functions: “(a) preventive controls, (b) detective controls and (c) corrective controls” (p. 190). The purpose of SOX, in addition to restoring public confidence and trust, is to create an environment where intentional fraud is prevented and unintentional errors are detected and corrected. IT systems provide an efficient way to fulfill those responsibilities. All of these new regulations and requirements are certified by corporate leadership and verified by outside auditors working in conjunction with one another. The use of flowcharts is one tool that can assist corporate officers in demonstrating that a reliable system of internal controls exists. Another way that companies can establish a reliable system of internal controls was developed by the Information Systems Audit and Control Association (ISACA). The Control Objectives for Information and Related Technology (COBIT) framework “consolidates control standards from many different sources into a single framework” (Romney & Steinbart, 2015, p. 192). COBIT focuses on three areas: (a) management creation of common practices within IT environments, (b) user assurance that adequate IT controls are in place and (c) outside audit review and recommendations on IT controls (Romeny & Steinbart, 2015). During this week, you will focus on understanding the importance of internal controls in a business organization, and especially for publicly traded organizations. You will also inter-relate the requirements of the Sarbanes-Oxley Act of 2002 to the need for a solid system of internal controls and what creates effective controls. Please click on the links below to access a PDF version of the textbook PowerPoint Presentation for the weekly readings. Chapter 2 PowerPoint Presentation (PDF) Chapter 4 PowerPoint Presentation (PDF)