Discuss Internal Control Weaknesses and Accounting Conservatism.
SUMMARY OF PRIMARY PAPER
For the purpose of this assignment, you will need to write 2 page (double spaced, 12 font times new roman) summary of primary page selection (Internal Control Weaknesses and Accounting Conservatism: Evidence From the Post–Sarbanes–Oxley Period. By: Mitra, Santanu; Jaggi, Bikki; Hossain, Mahmud. Journal of Accounting, Auditing & Finance. Apr2013, Vol. 28 Issue 2, p152-191. ). In this summary, you will need to condense the primary paper to its main points and to do so in your own words. To include every detail is neither necessary nor desirable. Instead, you should extract only those elements which you think are most important. Try to ask yourself, why was this paper published?, why is it exciting?, what do you take away from this paper?, how does it help you
Internal control weaknesses refer to deficiencies in the design or operation of a company’s internal control system that could result in errors or fraud in financial reporting. These weaknesses can include inadequate segregation of duties, lack of proper authorization procedures, insufficient monitoring of transactions, and inadequate documentation of accounting processes. Internal control weaknesses can increase the risk of financial misstatements, which can lead to inaccurate financial statements.
On the other hand, accounting conservatism is a principle in accounting that requires c
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Internal control weaknesses and accounting conservatism are related in that internal control weaknesses can increase the risk of financial misstatements, which can be mitigated by accounting conservatism. For example, if a company has weak internal controls over its inventory, it may be more likely to overstate its inventory balances. However, if the company applies accounting conservatism, it will recognize lower inventory balances, reducing the risk of financial misstatements.
In summary, internal control weaknesses and accounting conservatism are both important concepts in accounting that relate to the accuracy and reliability of financial information. Companies must have strong internal controls in place to ensure the accuracy of their financial statements, and they must also apply accounting conservatism to ensure that financial statements are not overstated and potential losses are recognized promptly.