Internal controls are in place to protect entities from theft by dishonest workers and external predators. They are also a careful set of checks and balances and are able to find discrepancies. The Sarbanes-Oxley Act of 2002 (SOX) is named for Senators Paul Sarbanes and Michael Oxley. The law has 11 titles and there are about six areas that 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 and all companies must comply with it. These audits can be expensive, but they have identified areas within companies that need to be protected. It also showed some areas of the business that had unnecessary repeat practices. It gave investors a sense of confidence in companies that complied with the SOX law. Section 404 of the SOX Act 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 its internal controls in its 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 have a decline in stock prices. Investors will not trust that company's financial information. Investors know the company will be hit with fines for failing to comply with regulations. No honest investor wants to be involved in a company that challenges the government. There are some limitations of internal controls. One is a person who knows the system. This person knows when everything is over and how it was done, he can find a loophole and use it to his advantage. Another limitation is... half of the paper... l. If a transaction is missed or liquidity does not increase, management must be notified. While internal controls do not always work, every entity that has employees should have internal controls in place. 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 get control of accounting irregularities. Dishonest accounting has cost company employees millions of dollars in pension 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, L.M., & Rexroad, W.M., Ostrosky, J.A. (2004). Sorbanes-Oxley What this means for the market. Accounting Journal. Retrieved December 17, 2009, from www.journalofaccountancy.com