Internal controls are in place to protect entities against theft by dishonest workers and outside predators. They also constitute a precise series of checks and balances and are in place to detect deviations. The Sarbanes-Oxley Act of 2002 (SOX) is named after Senator Paul Sarbanes and Michael Oxley. The law has 11 titles and around six areas are considered very important. (Sox, 2006) The Sarbanes-Oxley Act of 2002 required publicly traded U.S. companies to create internal controls. The SOX law is mandatory, all companies must comply with it. These controls can be costly, but they help identify areas within businesses that need to be protected. It also showed some companies areas where repeated and unnecessary practices were being applied. This gave investors a sense of confidence in companies that complied with SOX. Section 404 of SOX requires the auditor to evaluate and report on the company's management of internal controls. The law requires a company to include a copy of internal controls in the year-end annual report. All financial statements must be certified by a company's management. (Coustan, 2004) A company that announces deficiencies in its internal control will most likely experience a decline in its stock price. Investors will not trust this company's financial information. Investors know that the company will be fined for non-compliance with regulations. No honest investor wants to get involved in a business that defies the government. Internal controls have certain limitations. One is a person who knows the system. This person knows when everything is done and how it is done, he can find a loophole and use it to his advantage. Another limitation is...... middle of paper ......l. If a transaction is missing or the available cash does not add up, management should be informed. Even though internal controls don't always work, every entity that has workers should have internal controls. Internal controls protect entities from dishonest workers. Internal controls are a series of checks and balances. The Sarbanes-Oxley Act of 2002 was necessary to control accounting irregularities. Dishonest accounting cost company employees millions of dollars in retirement funds. It also cost investors millions of dollars. Works Cited Guide to the Sarbanes-Oxley Act of 2002 (2006). Retrieved December 16, 2009 from www.soxlaw.comCoustan, H., Leinicke, LM and Rexroad, WM, Ostrosky, JA (2004). Sorbanes-Oxley What this means for the market. Accounting journal. Retrieved December 17, 2009 from www.journalofaccountancy.com