Internal Controls

Internal controls are those measures implemented by organizations for purposes of protection of resources against threats such as fraud, inefficiency, and waste. In addition, its purpose is evaluation of performance in all units; ensuring policy compliance and preparation of accurate and reliable accounting data. Internal control operates under five components and six principles; the five components namely; control environment, information and communication, control activities, and risk assessment. The six principles of control activities are; establishment of responsibility, segregation of duties, documentation procedures, physical controls, independent internal verification and human resource control (Kimmel, pg. 338, Straus 2008). The adequacy and effectiveness of any organization’s internal control is examined by the internal audit office. Its success is strengthened by reviews and recommendations from the internal auditing. The internal control requirements for the LJB Company to adhere before it goes publics will be addressed and it must be in accordance with Sarbanes-Oxley Act of 2002 (SOX.) All publicly traded corporations are required to preserve a satisfactory internal control system. Corporate presidents and administrators must ensure these controls are dependable and efficient. LJB Company needs to establish adequate internal control principles, whether it goes public or not (Kimmel, pg. 337, Straus 2008). The interest of LJB to go public will only become successful when, proper internal checks are administered. The overall image of the company can be build when the company complies with clear ethical practices. The LJB Company is a new local distributor and the Sarbanes-Oxley Act of 2002 provides a mandatory set of standard rules and regulations to be followed by all U.S corporations to adequately maintain an internal