We generally only hear of scandal and material control weakness impacting public companies through our traditional media outlets. Evaluation of internal controls is just as important in privately held companies and small businesses. Research internal controls using online library resources, and the Internet. Respond to the following:
- Explain how the understanding of internal control for a public company differs from that for a private entity in accordance with Generally Accepted Auditing Standards, (GAAS).
- Find an article or a news story that discusses a fraud involving a weakness in control in a nonpublic company or small business. Give complete citation for the article. Summarize the article and discuss the weakness in control you believe led to the scandal or fraud.
- The Sarbanes-Oxley Act is the major act created as a response to failures such as Enron and it regulates many aspects of a company and its controls. Depending on whether your selected example occurred before or after SOX, discuss whether the act could have or did detect the fraud.