What is internal control

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Enron was one of the most publicized fraud cases of the late 20th century; it was so serious that it not only led to its own demise, but to the dissolution of Arthur Andersen, one of the (then) "Big Five" CPA firms. Enron and related cases led to the most sweeping legislation impacting the accounting profession since the 1930's: the Sarbanes-Oxley Act of 2002. In "Trials and Tribulations of Enron and S-Ox" (Forbes, 23 January 2006), Pitt stated: "The principal deficiencies that led to Enron's demise are easy enough to catalog. They include... a serious lack of meaningful internal controls."

a. What is internal control?

b. Explain the importance of COSO's 2013 Internal Control-Integrated Framework in establishing strong internal control.

c. Consider the following risk exposure at Enron: insufficient cash of operations, fraudulent accounting, too close a relationship with auditors, declines in stock price. For each risk exposure, indicate the relevant category of the Brown taxonomy; suggest at least one internal control to address the risk.

Reference no: EM131768087

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