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CHAPTER 7
A threat or event is any possible adverse activity. The exposure or impact is what referred to
when the possible damage happened from a threat . The chance of this occurring is called the risk of
the threat. Internal controls are the mechanisms and techniques used to ensure that control targets are
maintained. Internal control schemes have intrinsic limits, such as accident and error susceptibility,
failure to judge and make decisions, management override, and etc. In order to develop a mechanism
for internal management, a comprehensive knowledge of IT capacities and threats and how IT can be
used to achieve organizational process goals are needed. Accountants and system engineers assist
managers by developing appropriate control mechanisms and by making it possible for controllers to
make a system at the early stage of design. Three essential duties are carried out by internal
management, which include prevention controls, detective control and corrective control. Internal
controls are sometimes divided into two groups, general and application controls. Sadly, not every
organization has an efficient method of domestic regulation. Relevant areas such as security
standards, password protection and use, and software creation are to be concerned.
In order to avoid companies from bribing to foreign officials to acquire business, Foreign
Corrupt Practices Act (FCPA) was made. Congress issued a statement in the FCPA from the
American Institute of Certified Public Accountants (AICPA), encouraging businesses to have good
internal management mechanisms. These criteria were sadly not adequate to avoid additional issues.
News reports of accounting frauds at Enron, Xerox, etc, in the late 90s and early 2000s. In regard to
these frauds, Congress approved the Sarbanes–Oxloy Act (SOX) to deter fraud in financial reporting,
protect taxpayers, etc. SOX's most significant features include the Public Company Accounting
