Why can’t ethics replace internal controls?
Thank you for all of your help!
For your first question, the act has demanded that management assess its own internal controls over financial reporting which leads them to mitigate risks of material mistatements due to errors or frauds.
For the second one, ethics cant replace internal controls due to two reasons:
1. Mistatements due to errors are not caused by lack of ethics but lack of proper error mitigating controls (preventative and detective measures).
2. Management may include unethical people and you can’t get as much assurance that management is ethical as you can from testing to see if a control is working.
January 28th, 2010 at 10:41 am
For your first question, the act has demanded that management assess its own internal controls over financial reporting which leads them to mitigate risks of material mistatements due to errors or frauds.
For the second one, ethics cant replace internal controls due to two reasons:
1. Mistatements due to errors are not caused by lack of ethics but lack of proper error mitigating controls (preventative and detective measures).
2. Management may include unethical people and you can’t get as much assurance that management is ethical as you can from testing to see if a control is working.
References :
SOX auditor