Sample Theology Essay Paper on Controls and procedures

The Sarbanes-Oxley Control and Procedures are the requirements, measures, and
guidelines that are to be followed by Amazon in an attempt to minimize the fraud occurrence and
other significant corporate scandals that may arise. These procedures apply to the accounting and
financial departments since they are involved in data acquisition and storage. Each of the
departmental officials is assigned responsibilities which are in accordance with the Amazon
Sarbanes-Oxley Act of 2002. The CFO is mandated to approve and sign all financial reports and
statements as well as the tax return of the corporation he is entitled. The CEO has similar
responsibilities as the CFO. The Controller is an assistant to the CEO or the CFO in the
preparation of financial statements (Bamber, & Bamber, 2006).
The Sarbanes-Oxley compliance procedure activity involves mainly the internal control
system plan and corporate responsibility plan. The Amazon’s internal control structure and
procedures feature prominently in Section 404 of the SOX act. This section requires a publicly-
held company’s auditor to attest to and report on management’s assessment of its internal
control. The standards used by the auditors are prescribed by the Public Company Accounting
Oversight Board (PCAOB). The AICPA has consistently urged on the implementation of Section
404(b) for all publicly held companies in the belief that all investors should have equal benefits
as well as protection (Zhang, 2007). Greater transparency and improved financial reporting have
been achieved in the process and the business operations remain successful in the long run.
The 404 section is the most complicated and most expensive to implement. These
controls are in two categories; Preventive controls and detective controls. The preventive control
employed by Amazon companyis mostly associated with more than one party. For instance, in an

attempt to keep unauthorized payment from being issued the accounts department would
segregate the duties such that one person approves the invoice, the other prepares payment and a
third party signs the check. Detective controls aims at identification of errors and irregularities
the have already occurred. Monthly reconciliation of cash accounts on a basis is such an
The primary areas of expanded auditor focus under 404(b) include; enhancement of
transaction flow analysis and documentation, improvement of key control descriptions and
operating evidence, incremental procedures to validate the design adequacy and operating
effectiveness of internal control at third-party service providers and monitoring of administrative
access rights to systems and applications. The expansion provides a variety of bases to consider
in the validation process. Control of inadequate methods of operations renders it difficult to
come up with the most sufficient results although some estimation remain necessary for the
purpose of evidence. (Bamber, & Bamber, 2006).
Section 302 of the Sarbanes-Oxley Act is mainly involved with the corporate
responsibility for financial reports. Under this section, the CEO’s and the CFO’s are to certify
that the financial statements are accurate and the disclosure of reports presents all aspects of the
financial condition and operations of the Amazon Company. The CEO and CFO, however, have
a challenge of deciding whether he or she can certify to the accuracy and wholesomeness of the
disclosure in a Form 10-K and 10-KSB in that until the report is filed and specific information
can be disclosed. Also, under this section, a public company is required to conduct an evaluation
of the company’s internal disclosure controls and procedures within three months of filing either
the quarterly or annual report for


The Sarbanes-Oxley Act of 2002 has had an extreme effect on corporate governance of
Amazon in the U.S. It has strengthened the audit committees of public companies by allowing
the approval of numerous audit and non-audit services and complaints handling regarding the
management’s accounting practices. This act has placed a strict requirement on the top managers
concerning the accuracy of financial reporting. The disclosure requirement has also become
strengthened by requiring the public companies to disclose any proformas statements about their
appearance under the Generally Accepted Accounting Principles (GAAP), any materials off-
balance sheet and reporting of their stocks transactions to the Securities and Exchange
Commission (SEC). Of the most benefit within the act is section 404 which demand extensive
internal control test which must be inclusive of the internal control reports from their annual
audits. The above measures have positively impacted on the Amazon investors’ confidence in
financial markets and minimize fraudulent incidences. However, the Act also gets faced with
various shortcomings. The act is seen to adversely affect the private and non-profit in that they
are left with few auditors to choose from due to the high demand for auditors by the public
sector. Besides, the audit fees have drastically increased, and also bank financing has decreased
as well for private and non-profit firms. It is therefore recommendable in the future that such
Acts should be thoroughly investigated of their implications before enacting them.

Other sections covered in the annual report

Risks in operation

The foreign currency exchange risk poses as one of the main challenges experienced by
Amazon during operations. As the local currency determines how activities are carried out, the

various occasions have indicated low income compared to the numerous expenses incurred
during the operation periods. The recurrent fluctuation such as that for the year 2000 resulted in
unfavorable conditions for business. Lack of local control by Amazon as a private corporation to
the specific regions in the world inhibits any capabilities to rectify the situations. The PAECS
and Euro denominations experienced at the close of the market in the same year from 690 to 624
million Euros representing a deficit of millions resulting from the exchange rates (Jensen, &
Xiao, 2001). A debt principle of 615 million Euros got set apart to cater for the offsets brought
about by the changes. Investment risk also poses a challenge to equity securities. Combination of
public and private investments leads to cases of losses which get perceived to originate from the
public sector as it remains the most unpredictable area of operation.
Business combinations

The year 1999 towards 2000 marked Amazon’s incorporation with Alexa internet,, Acme electric motor Company,, and Basic Toys Company. Over 780
million dollars got expended for these incorporations. The plan for acquisition intended to
combine efforts for the uniformity of stocks and cash providing high confidence that the program
would work out for the best of planned output. However, more incorporation costs became
evident for the other types of transactions involving such transfer of ownership from the original
owners to the current ones. However, the year 2000 incurred no acquisition expenses as none
occurred throughout the operational period (Bamber, & Bamber, 2006).
Leases and market agreements

The Amazon Company raises more avenue from office leases through non-cancelable
terms and capital leases. For the three years of 2000, 1999 and 1998, the resulting incomes

amounted to 98, 43 and 8 million dollars respectively indicating progressive achievements
through the years. Fixed-fee commitments represent other engagements in the year 2002 through
2006 where the resulting duties sum to $19 million. The amounts derived from such investments
usually get based on the terms of agreements between the parties (McMahan, 2006).

Legal proceedings

Federal lawsuits were filed to Amazon as a limited liability company together with the
subsidiary namely Alexa. The allegations argue that Alexa’s data monitoring, storage, and
tracking of internet usage paths infringes the law and users. The practices gat believed to violate
the federal regulations on prohibiting unauthorized access, unfair competition, illegal
interception of private networks, and trespass against privacy. The unacceptable activities by
Alexa as claimed by the affected groups intended to seek for compensation of any lateral damage
as a result of acting against the agreed upon terms between the clients and the service provider
(Zhang, 2007). The pending case got prospected to have the Amazon Company and the
subsidiary take a winning ground for the genuine reasons behind such actions based on
intentions. Such cases remain common and the authorities rely on the side that takes the best of
public interest.


Bamber, E. M., & Bamber, L. S. (2006). Using 10-K reports brings management accounting to
life. Issues in Accounting Education, 21(3), 267-290.
Zhang, I. X. (2007). Economic consequences of the Sarbanes–Oxley Act of 2002. Journal of
accounting and economics, 44(1-2), 74-115.
McMahan, J. (2006). The Handbook of Commercial Real Estate Investing: State of the Art
Standards for Investment Transactions, asset Management, and Financial Reporting.
New York: McGraw-Hill.
Jensen, R. E., & Xiao, J. Z. (2001). Customized financial reporting, networked databases, and
distributed file sharing. Accounting Horizons, 15(3), 209-222.