LJB Company: Internal Controls
Contents Introduction 3 Internal Control Requirements 2 Strengths and Recommendations 2 Violations 3 Conclusion 4 Works Cited 4
LJB Company has asked the accounting firm to evaluate their system of internal controls because of the plan to go public in the near future. The president wants to be aware of any new regulations required of his company if they go public. The current system of internal controls was explained to the accounting firm. Under SOX Sarbanes-Oxley Act of 2002, all public traded U.S. corporations are required to maintain a sufficient system of internal controls. In order for this to be implemented all Corporate Executives and …show more content…
Although these two duties are being performed by one person and stream lining the process this causes LJB to be susceptible to fraud and out of compliance with the SOX act requirements. Each of these duties should be performed two different individuals.
LJB Company has lack of cash controls. The lack of cash control has to be watched because within LJB each employee has access to petty cash and that shouldn’t be the case. Access to petty cash should be restricted to authorized personnel only. Any time there is a disbursement from the petty cash there should be an original receipt and signature that received the reimbursement.
LJB Company human resource controls are very limited. Within this company both the Accountant and President have to review and approve all of the new hires which is the process. If LJB had a proper human resource control there would be a function set in place for new hires by hiring someone with HR experience that has risk training. Having a more defined HR control resource this would allow the company to clearly define the different roles and responsibilities for each employee. Also with the HR resource all employees would go through background check, each employee be given their own username and password and be tracked with the activity report.
We believe that this assessment of the current controls of LJB Company and the recommendations provided will meet your expectations and allow your company to be a fully traded