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Acct504

In: Business and Management

Submitted By angeljaxon
Words 659
Pages 3
Prepared for: Jon Adams – President of LJB Company
Date: December 1, 2013

After meeting with Mr. Smith, the president of LJB Company, he has informed me of his decision to make the company a public entity. Before this process can happen, we must first review any new rules or regulations that apply to private companies going public. Good corporate governance within an organization could make a company more attractive to potential buyers, investors, and other capital sources. After reviewing the Sarbanes-Oxley Act 404 of 2002, all public traded US corporations are required to maintain an adequate system of internal controls. The field of internal controls comprises of an organization's structure, work and authority flows, people and management information systems which is designed to help the organization accomplish specific goals or objectives.
If LJB Company decides to go public, the components of the Internal Control would be based upon the procedures of a controlled environment, risk assessment, control activities, information and communication and monitoring. LJB has had a great retention rate that allows us to identify on a business and personal level with the employees. The employees here at LJB, have shown consistent work ethic as they have also proven to have a shared investment with the company. Our controlled environment is tightly knitted together with the job duties delegated to individuals that matches their specific education and back ground. There was mention of an indelible ink machine. Using this machine would help prevent fraud because the ink used cannot be erased or washed away. This machine falls under the internal control principles of cash disbursements
Quarterly training and testing will also be implemented to make sure all employees are made aware of any new changes, policies and procedures that have taken place within the company. It has also been brought to my attention that petty cash has been handled in a manner not suitable for business. There are too many employee’s that have access to funds that is not documented nor is this process of handling the petty cash allowing management to know what the funds are used for. We will now assign one person to handle the distribution of funds as well as time slots. This correspondence will be conveyed via email as to when the funds would be needed, the purpose for the usage of the funds and approval information to the party in who’s making the request. This procedure falls under the internal control principles to cash receipts.
Also, in an effort to monitor the action of LJB Company employees, specific usernames will be assigned. This will allow upper management to know who is logging on to what computer and what is being viewed. Upper management will have specific usernames that depict their job description.
Finally, before a person is hired as an employee here at LJB Company, a thorough background check will be conducted by members of the FBI that will consist of an individual’s social security number and finger printing. This will ensure that we are not conducting business with previously convicted felons. Not conducting a background check on potential employees, could eventually lead to damaging the credibility and the integrity of our company because we do not know if this person was involved in a previous crime. With the aid and assistance of the re-structuralized management team and the efforts of the employees here at LJB Company, the principles of internal control which includes the establishment of responsibility; segregation of duties; documentation procedures; physical controls; independent internal verification; and human resource control, LJB can and will become a company that ensures the integrity of financial and accounting information by meeting the operational and profitability targets that will transmit management policies throughout their organization.

Work Citied:

Kimmel, Paul D., Weygandt, Jerry J., and Kieso, Donald E. Financial Accounting: Tools for Business Decision Making 7th Edition. John Wiley and Sons, Inc 2013; Pg. 366

http://www.bna.com/Internal-Controls-Section404-p3682/…...

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