December 2012
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Material Weaknesses in Internal...
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Material Weaknesses in Internal Control Related to the Statement of Cash Flows
Daniel M. Ivancevich, PhD, and Susan H. Ivancevich, PhD, and Dana R. Hermanson, PhD
Since the implementation in 2004 of section 404 of the Sarbanes-Oxley Act of 2002 (SOX), “Management Assessment of Internal Controls,” several CPA Journal articles have provided insight into the types of material weaknesses disclosed in auditor or management SOX 404 reports, including weaknesses related to revenue recognition (Dana R. Hermanson, Daniel M. Ivancevich, and Susan H. Ivancevich, “SOX Section 404 Material Weaknesses Related to Revenue Recognition,” October 2008, pp. 40–45), employee compensation (Dana R. Hermanson, Daniel M. Ivancevich, and Susan H. Ivancevich, “Remediation of Material Weaknesses Related to Employee Compensation,” April 2009, pp. 28–33), and segregation of duties (Audrey A. Gramling, Dana R. Hermanson, Heather M. Hermanson, and Zhongxia [Shelly] Ye, “Addressing Problems with the Segregation of Duties in Smaller Companies,” July 2010, pp. 30–34). Such articles might help readers appreciate the variety of accounting and control issues that have led to material internal control weaknesses for public companies; in addition, these articles might help them prevent such costly problems in their own organizations.