Page 359 - Encyclopedia of Business and Finance

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Free Enterprise

require management and the independent auditor of pub- FREE ENTERPRISE
lic companies to assess and report on the effectiveness of SEE Economic Systems
the company’s internal control over financial reporting.
Management must state in its report its responsibility for
maintaining adequate internal control over financial
reporting and give its assessment of whether or not inter- FUND ACCOUNTING
nal control over financial reporting is effective or not.
The independent auditor must evaluate and report SEE Government Accounting; Not-For-Profit Accounting
on the fairness of management’s assessment. The auditor
will also perform an independent audit of internal control
over financial reporting and will issue an opinion on
whether internal control is operating as of the assessment FUTURE BUSINESS
date. If one or more material weaknesses exist at the com- LEADERS OF AMERICA
pany’s fiscal year-end, the auditor cannot conclude that Future Business Leaders of American (FBLA) is one of ten
internal control over financial reporting is effective.
nationally recognized vocational student organizations in
The purpose of these reporting requirements is to the United States (Gordon, 2003). The organization is a
increase the likelihood that material weaknesses in inter-
nonprofit educational association for students who are
nal control over financial reporting will be identified and
preparing for careers in business and business-related
remediated.
fields. The organization is composed of four divisions:
Despite these requirements, it is still possible for fraud-
ulent financial reporting to occur. Although the intended • FBLA for middle school students
results of internal control reporting is to reduce the likeli- • FBLA for high school students
hood that material fraud will go undetected, no system of
internal control provides absolute assurance that manipula- • Phi Beta Lambda (PBL) for post-secondary students
tion, collusion, or management override will not occur. • A professional division composed of businesspeople,
SEE ALSO Auditing; Forensic Accounting educators, and other individuals who uphold the
goals of the organization (“Frequently Asked Ques-
tions,” 1999)
BIBLIOGRAPHY
Blue Ribbon Committee. (1999). Improving the effectiveness of FBLA has been in existence since 1937. Dr. Hamden
corporate audit committees: Report and recommendations of the
Blue Ribbon Committee on improving the effectiveness of corpo- I. Forkner of Teachers College of Columbia University
rate audit committees. New York: New York Stock Exchange; developed the first chapter in New York City (Vaughn et
Washington, DC: National Association of Securities Dealers. al., 1987). In 1940 the National Council for Business
Committee of Sponsoring Organizations of the Treadway Com- Education recognized and sponsored FBLA. The first high
mission. (1992). Internal control—Integrated framework. New school chapter was chartered in Johnson City, Tennessee,
York: Author. on February 3, 1942. Currently, more than 25,000 active
Committee of Sponsoring Organizations of the Treadway Com- members participate in the organization.
mission. (1999). Fraudulent financial reporting: 1987–1997:
An analysis of U.S. public companies. Retrieved January 13, Students participating in FBLA have the opportunity
2006, from http://www.coso.org/Publications.htm to develop leadership skills; enter a variety of competitions
National Commission on Fraudulent Financial Reporting. at local, state, and national levels; establish occupational
(1987). Report of the National Commission on Fraudulent goals; and learn from business and professional individu-
Financial Reporting. Washington, DC: Author. als in their communities. The goals of FBLA (and PBL)
Public Company Accounting Oversight Board. (2004, June 17). are:
Auditing Standard No. 2: An audit of internal control over
financial reporting performed in conjunction with an audit of • To promote competent, aggressive business leader-
financial statements. Retrieved January 13, 2006, from ship
http://www.pcaobus.org/Standards/Standards_and_Related_
Rules/Auditing_Standard_No.2.asp • To understand American business enterprise
Whittington, Ray, and Pany, Kurt (2006). Principles of auditing • To establish career goals
and other assurance services (15th ed.). Boston: McGraw-
Hill/Irwin. • To encourage scholarship
• To promote sound financial management
Gerard A. Lange • To develop character and self-confidence

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