Question

rior to beginning work on this discussion forum, visit the The Sarbanes-Oxley Act 2002 (Links to an external site.) Search the Internet and locate an annual financial report for a public U.S. company. Read the “Notes” to the Financial Statements to determine the criteria for cash equivalent and how cash and cash equivalents are handled.

In your initial post, you will discuss your findings. Find information about the internal control policy of the company and summarize this policy in your post. Is it in compliance with SOX? What are some references to SOX mentioned in the annual report? Your answer should demonstrate understanding of the Sarbanes-Oxley Act, and be a minimum of 200 to 200 words in length.

Answer 1

1. Cash and cash equivalents is a line item on the balance sheet,stating the amount of all cash or other assets that are readily convertible into cash. Any items falling within the definition are classified within the current assets category in the balance sheet. Examples of cash are coins,currency,cash in checking accounts, cash in savings accounts, bank drafts etc. and examples of cash equivalents are commercial paper ,marketable securities ,money market funds and treasury bills. The two primary criteria for classification as a cash equivalent are that an asset be readily convertible into known amount of cash, and that it be so near its maturity date that there is an significant risk of changes in value due to changes in interest rates by the time the maturity date arrives. If there is any question about whether financial instrument can be classified as a cash equivalent consult with the company auditors. Cash and cash equivalents information is sometimes used by analysists in comparison to company's current liabilities to estimate its ability to pay its bills in the short term .However such an analysis may be flawed if there are receivables that can be readily converted in to cash with in a few days.. 2. INTERNAL CONTROL POLICIES AND PROCEDURES.: An effective internal control structure includes a company plan of organization and all the procedures and actions it takes to. a. Protects its assets against theft and waste b. Ensure compliance with company policies and federal law C. Evaluate the performance of all personnel to promote efficient operations d. Ensure accurate and reliable operating data and accounting reports. Internal control is to ensure the efficient operations of a business thus enabling the business to effectively reach its goals. 3. The Sox cracks down on corporate fraud.It created the public company accounting oversight board to oversee the accounting industry. The Act strethens the independence and financial literacy of corporate boards.