What did the Treadway Commission report of 1987 emphasize?

The Treadway Commission report of 1987 is significant for highlighting the necessity of establishing a robust system of internal controls within organizations. It aimed to address the rising concerns over financial reporting, especially regarding the integrity and reliability of financial statements. By emphasizing the need for effective internal controls, the report underscored that these mechanisms are essential for preventing fraud, ensuring accurate financial reporting, and maintaining investor trust. Properly designed internal controls help organizations mitigate risks associated with financial misstatements and enhance operational efficiency. This focus on internal controls was instrumental in shaping practices and regulations that would later influence the creation of the Sarbanes-Oxley Act in 2002, which further solidified internal control requirements for publicly traded companies.