Week One Discussion Questions Essay Example | Topics and Well Written Essays - 500 words

Week One Discussion Questions - Essay Example Without these estimates, it would be impossible for the company to make the changes necessary today to keep the companys finances on solid ground tomorrow. By the time the hard data was in, it might be too late. Many stakeholders, internal and external, rely on a companys accounting estimates as a basis for the decisions that impact their business activity. Shareholders may make a decision to buy or sell. Vendors may increase or decrease the production of raw materials. Plans for expansion may be made based on revenue estimates. For these reasons, it is imperative that the accountant provides an accurate, and ethical, estimate based on the information available. There may be a temptation to exaggerate, overlook, or manufacture the data in an effort to unfairly benefit a specific stakeholder, such as the case at Enron and its unethical practices. The Sarbanes-Oxley Act, passed in response to Enrons unethical and deceptive estimates, now requires all publicly held companies to have a "financial expert serving on its audit committee" and have a set of "written standards reasonably designed to deter wrongdoing" (Green, 2005, p.239). 2.) Internal controls are a set of processes and procedures that a company has in place to protect and insure solid management practices, and reduce the potential for unethical activity. Internal controls help prevent a careless, intentional, or malicious act from impacting the company in a negative fashion. For example, requiring that two different people sign all checks can help prevent the unauthorized use of a specific bank account. In addition, multiple experts, that can all agree and form a consensus as to their probablility of being accurate, should review all estimates. Internal controls are generally placed at points of transactions where money and goods are most at risk. The accounts payable account could be at risk if a malicious employee manufactured false invoices to be paid to their personal account. An internal