For example, Congress passed the Sarbanes-Oxley Act that requires companies to look over their internal control and to take responsibility for their financial reports (Nobles, Mattison, Matsumura, & Horngren, 2014, p. 375). When it comes to the business side of receivables, businesses need to have solid internal control procedures, which may include: separation of duties, assigning responsibilities, and audits to make sure everyone is being ethical and not circumventing laws. For example, if a business understated bad debt or fails to make a reasonable estimate of uncollectible receivables, it will overstate net income and its accrual for bad debt will be understated. Consequently, this could mislead a bank to thinking the business has more cash or expects more cash than it will end up
For example, Congress passed the Sarbanes-Oxley Act that requires companies to look over their internal control and to take responsibility for their financial reports (Nobles, Mattison, Matsumura, & Horngren, 2014, p. 375). When it comes to the business side of receivables, businesses need to have solid internal control procedures, which may include: separation of duties, assigning responsibilities, and audits to make sure everyone is being ethical and not circumventing laws. For example, if a business understated bad debt or fails to make a reasonable estimate of uncollectible receivables, it will overstate net income and its accrual for bad debt will be understated. Consequently, this could mislead a bank to thinking the business has more cash or expects more cash than it will end up