Internal Control Essay Example for Free

inner Control Essay(1) If the LJB Company should decide to become a publicly traded company, a few internal gives should be implemented to consent with the Sarbanes-Oxley Act (SOX). * Management will need to provide periodic quarterly reports to evaluate the effectiveness and reliability of LJBs internal controls over financial report procedures. * Management should certify the accuracy and fairness of presentation of their financial statements. * Independent auditor(s) outside of LJB will need to attest to managements assessment of verbalise internal controls.Additionally, non-audit services between these cardinal parties (LJB and said independent auditor) are prohibited. (2) There are a few internal control measures that LJB already has in effect and are better for it the use of pre-numbered invoices by the accountant and your (the Presidents) involvement in the approval and hiring process of new employees. I also propose the purchase of the indelible ink machine as per the accountants request. As this applies to the Internal Control linguistic rule of Physical Control, future check mockery will be more difficult to be accomplished.3) There are several internal control weaknesses that I assess LJB currently has. Following from each one weakness I list below is a recommendation from myself to rectify these internal control weaknesses. * One is risk is the accountant who serves as Treasurer and Controller. Although I understand this is to streamline many processes, it possesses a risk where an opportunity is created for this employee to commit fraud. This also violates the Segregation of Duties Principle of Internal Control Principles.I recommend that these two responsibilities be segregated 2 different employees. * When the accountant in charge of payroll leaves employees checks in his office unsupervised and unsecured, it presents an opportunity for theft. This violates the Internal Control Principle of Physical Control, as though checks are not constantly kept in the accountants office safe prior to pick up. I recommend that these checks remain physically secured at all times (by the accountant, or by delaying delivery to the accountant until he reaches his office).Due to the unorthodox honor carcass of dealing with petty cash, any single employee can withdraw a substantial amount of petty cash in relative anonymity. This violates two Internal Control Principles Physical Control and Establishment of Responsibility. It violates the Physical Control Principle because the petty cash is easily accessible with no form of physical shield of theft, and it violates the Establishment of Responsibility Principle because no single person is in charge of the Petty Cash Fund (rather everyone is).This can be remedied by duty assignment a custodian to be responsible for the fund, as well as creating a secure area to store said funds. * These previous points additionally adopt up another weakness, though not actually part of the Inte rnal Control Principles. Though it seems to be LJBs unofficial policy to trust semipermanent employees, when a desirable opportunity to commit fraud/theft arises, it becomes at the discretion of the employee to commit these acts for their personal benefit. Another weakness is LJBs lack of somebody passwords which allows personnel to anonymously use the company computers and databases.This lack of individual accountability will prevent most attempts to track suspicious employee activities on company computers and databases. This shell violates the Internal Control Principle of Physical Control. I recommend assigning employees individual accounts and passwords, as well as creating a form of digital control to prevent future unauthorized activities, such as viewing pornography on company computers.Lastly, because LGB unknowingly hired a convicted felon, it can be deduced that LGBs clement Resource Department may be lacking, due to the fact that a background check should have caught h is criminal history. This may violate the Human Resource Control Principle of the Internal Control Principles. I recommend that the Human Resource Department reevaluate their policies and staffing procedures to prevent future incidents from happening. Thank you for fetching the time to read this letter and please consider my recommendations before going public with the LGB Company.