MATERIAL WEAKNESSES IN INTERNAL CONTROL RELATED TO LOANS AND RECEIVABLES

The late 1990s and early 2000s were marred with the announcement of numerous financial accounting scandals. The Sarbanes-Oxley (SOX) Act significantly changed corporate financial reporting and the auditing profession. Since the enactment of SOX in 2002, publicly traded companies have struggled to ad...

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Bibliographic Details
Published in:Internal Auditing 2012-07, Vol.27 (4), p.16
Main Authors: Ivancevich, Daniel M, Ivancevich, Susan H, Kerler, William A
Format: Article
Language:English
Subjects:
Access to information
Accounting
Accounting policies
Auditors reports
Audits
Financial reporting
Financial statements
Internal auditors
Internal controls
Loans
Loans receivable
Public companies
Receivables
Reconciliation
Revenue recognition
Valuation
Workforce planning
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Summary:The late 1990s and early 2000s were marred with the announcement of numerous financial accounting scandals. The Sarbanes-Oxley (SOX) Act significantly changed corporate financial reporting and the auditing profession. Since the enactment of SOX in 2002, publicly traded companies have struggled to adequately comply with the provisions of Section 404 of the Act. In short, Section 404 requires both management of public companies and auditors to evaluate and report on the effectiveness of the company's internal controls over financial reporting (ICFR). Companies' ICFRs are deemed ineffective if they contain any material weaknesses. This article examines 190 companies that were identified in auditor reports as having material weaknesses in internal control related to loans and receivables from 2006-2009. The authors identify six general categories of common material weaknesses related to loans and receivables and three general categories of remediation efforts. Finally, they offer observations on how internal auditors can help companies minimize problems related to loans and receivables.
ISSN:0897-0378