Internal Control: Case Study 2

1. Inform the President of any new internal control requirements if the company decides to go public. (7 points) According to the Sarbanes Oxley Act of 2002, all publicly traded U.S. corporations are required to maintain an adequate system of internal control at all time. As LJB Company President, you should be aware that a control environment must be presented at all times, and “that unethical activity will not be tolerated.” Your companies must identify and analyze the various factors that could create risk for your business and how your team can manage those risks. The overall internal control system needs to show and communicate all appropriate information within the organization, to ensure that the communicated information has reached the organization. According to the textbook, “It is very important to have testing and auditing of controls to build a long lasting organization.

2. Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the indelible ink machine. When you advise the President, please be sure to reference the applicable internal control principle that applies. (13 points) Its good that this company has been doing well with creating a balance environment for employees due to the long-term employees that are currently there. I can see that the managers and employees have a great balance, which keeps good control within the company. Also another good thing is that the accountant pick-ups the checks and also stores them into safe in his office, but the manager should have the only key to the safe to increase monitor of the checks. Its good that they have an accountant in place but instead of the accountant being the treasurer and controller they need to install a better segregation of duties amongst the employees