LJB Company

Internal Controls Evaluation and Assessment

CONTENTS:

1. Introduction and Scope ……………………….Page 1

2. Results and Findings……………………………Page 2

3. Recommendations………………………………Page 3

4. Reference Citations………………………….…Page 4 LJB COMPANY - Internal Controls Evaluation and Assessment

Introduction and Scope:

This evaluation looks at the current internal control system at LBJ Company, assesses for compliance with requirements for Initial Public Offering (IPO) and provides recommendations for strengthening the primary components of an effective Internal Control System.
Internal Control System Primary Components
1. A control environment: It is the responsibility of top management to make it clear that the organization values integrity and that unethical activity will not be tolerated.

2. Risk assessment: Companies must identify and analyze the various factors that create risk for the business and must determine how to manage these risks.

3. Control activities: To reduce the occurrence of fraud, management must design policies and procedures to address the specific risks faced by the company.

4. Information and communication: The internal control system must capture and communicate all pertinent information both down and up the organization, as well as communicate information to appropriate external parties.

5. Monitoring: Internal control systems must be monitored periodically for their adequacy. Significant deficiencies need to be reported to top management and/or the board of directors.
Each of the five components of an internal control system are important. The six principles of control activities are as follows.
• Establishment of responsibility: An essential principle of internal control is to assign responsibility to specific employees. Control is most effective when only one person is responsible for a given task.