...Introduction………………………………………………………………3 Evaluation of Internal Controls at LBJ Company………………………..4 Efficiency of LBJ Company………..……………………………………5 Inefficient Practices at LBJ………………………………………………5 Recommendation to Purchase Indelible Ink Machine…………………….6 Conclusion……………………………………………………………….7 Work Cited...…………………………………………………………….8 To: LBJ Company President From: Duc Nguyen, Accounting and Consulting Subject: Evaluation of LJB Company’s Internal Control Structures Date: February 10, 2013 Introduction In this assessment we will attempt to evaluate and address the efficiency or inadequacy of the internal control procedures used within LBJ Company. Internal controls are a system of checks and balances designed to detect and prevent fraud and errors. The Sarbanes-Oxley Act requires U.S. companies to enhance their systems of internal control (Kimmel 186). Complying with the internal controls practices set forth by SOX Act prevents fraud, encourage efficiency and effectiveness of operations, and ensures a company’s compliance with applicable laws. Furthermore we see that because of Sox many companies are improving the quality of its financial reporting. Under SOX, all publicly traded U.S. companies are required to maintain a sufficient system of internal control. Corporate executives and boards of directors must ensure that these controls are reliable and effective (Kimmel 337). We will address the five critical areas of internal controls which consist of: 1. The Control Environment 2...
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...LBJ: SOON TO BE A PUBLIC COMPANY A Guide To Internal Control Table of Contents 1. Introduction 2. Internal Control Standards 3. LBJ’s Successes 4. LBJ’s Opportunities For Improvement 5. Conclusion Introduction This is a report for the LBJ Company to better assist with the needs of internal control. Our findings are based off of what has been shared with us by the company president on how LBJ Company operates on a day to day basis. It does seem as if there is a form of some internal control although it may be ineffective. Internal control is defined by Washington State Administrative and Accounting Manual (SAAM, 2002) as “all the policies and procedures management uses to achieve safeguard assists, ensure reliability and integrity of financial information, ensure compliance, promote efficient and effective operations, and accomplish goals and objectives. In order for LBJ to continue their success and achieve the opportunity to become a public company there will be a need to improve current practices and strengthen the internal controls.” If LBJ does not implement a strict code for internal control than the ability to go public may not be a successful outcome and the lack of policy and procedures may hinder the company overtime. These findings were made based off of the observations and conversations of how the day to day business of LBJ Company operates. The scale of changes can be very small to some very drastic but we must...
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...LBJ DISTRIBUTION COMPANY AUDIT REPORT Unqualified Opinion (For the President) By SANDRA LADSON 09/29/12 [pic] Table of Contents Page 1. Executive Summary............................................................................................................3 2. Background/Introduction...................................................................................................3 3. Objectives & Method ....................................................................................................3 4. Disseminating info and presenting results………………………......................................4 4.1 What is good?.................................................................................................................. ..4 4.2 What is bad?.......................................................................................................................4 6. Recommendations and Action plans ………………………………………….………….….4 7. Conclusion………………………………………………..........................................................5 8. Acknowledgements.............................................................................................................5 9. Cited………………………………………………………………………………………………….5 EXECUTIVE SUMMARY LBJ Company a local distribution company has solicited the Langford Accounting Firm to present to the President of the company, an “unqualified...
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...LBJ Company “Going public in today’s environment” Table of Contents Preface…………………………………………………………….…Page 1 Introduction………………………………………………………Pages 1-2 Control Environment…………………………………………….Pages 2-3 Risk Assessment…………………………………………………….Page 4 Control Activities………………………………………………..Pages 4-9 Information & Communication………………………………...Pages 9-10 Monitoring……………………………………………………..Page 10-11 Summary……………………………………………………...Pages 11-12 References…………………………………………………………Page 13 Preface In the late 1990’s and early 2000’s the country witnessed accounting scandals in several large companies like Enron (which included Arthur Anderson), WorldCom, Rite Aid and Bristol-Myers Squibb. These companies were faced with satisfying investor’s desire for profits, trying to obtain loans on non-existing profits and they had to keep investor confidence high to keep revenues flowing in. However, in doing so, they cut corners and ultimately collapsed due to the lack of mitigating controls within their organizations, lack of management oversight and other acts of fraud. In 2002, Congress passed the Sarbanes-Oxley Act of 2002, also known as (SOX) to help circumvent these issues as it was having a devastating impact on the world economy. This legislation, specifically section 404, changed the face of how publicly traded companies handle their financial matters and the role of executive leadership within the organization in regards to the management assessment of internal controls. This is interpreted...
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...Case Study 2 Internal Controls In: Business and Management Fi504 Practice Case Study 2 Internal Controls SUBJECT: Evaluation of Internal Controls Mr. Smith, We have completed our assessment of LBJ Company’s system of internal controls. In addition, our firm researched the regulation regarding publicly traded firms in order to provide you with the most current information. Securities and Exchange Commission. “Official U.S. Agency Web Site.” Web. 24 September 24, 2011. Publicly traded corporations are required to implement the guidelines of the Sarbanes-Oxley Act of 2002. This means that publicly traded companies must include a management report on the internal controls of the company. The annual report must include an attestation report from a registered public accounting firm. The executive officers and the board of directors Wilson 2of LBJ Company are responsible for implementing and maintaining effective internal controls. Furthermore, the executive officers and board of directors of publicly traded companies must attest to the adequacy of the internal controls of the company. Failure to comply with the standards of SOX subjects LBJ Company, along with the executive officers and board of directors to severe penalties of fines and imprisonment. The five principles of internal control are the following: * Establishment of Responsibility * Segregation of Duties * Documentation Procedures * Physical Controls * Independent...
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...Week 5: Case Study 2 Internal Control To: President of LJB Company, Thank you for selecting our firm to provide your company with an evaluation of your organizations internal control system. Internal control systems are vital in securing your organizations assets, it will limit the risk of fraud as well as misuse of your assets. Comprehending how to separate duties among your employees will aid in improving transparency as well as keep your company financially strong. Before the company decides to go public it is important to know that all publicly traded companies are required to maintain a system of internal controls and procedures for financial reporting in accordance with the Sarbanes-Oxley Act of 2002 (SOX) (Harrison, Jr., Horngren, & (Bill)Thomas, 2013). It is the responsibility of your managers to ensure that there are reliable and active controls in place, and auditors from outside the company must assess and state the soundness of the company’s internal controls. (Harrison, Jr., Horngren, & (Bill)Thomas, 2013) The purpose of this act is to reduce potential corporate fraud by mandating specific procedures for financial reporting. Internal Control Requirement Internal control has five components and it is recommended the LBJ Company to adopt the following components in order to meet the SOX Act. The five Internal control components are: Control environment – Is the foundation for all other components of internal control, providing discipline and...
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...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...
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...SUBJECT: Evaluation of Internal Controls Mr. Smith, We have completed our assessment of LBJ Company’s system of internal controls. In addition, our firm researched the regulation regarding publicly traded firms in order to provide you with the most current information. Securities and Exchange Commission. “Official U.S. Agency Web Site.” Web. 24 September 24, 2011. Publicly traded corporations are required to implement the guidelines of the Sarbanes-Oxley Act of 2002. This means that publicly traded companies must include a management report on the internal controls of the company. The annual report must include an attestation report from a registered public accounting firm. The executive officers and the board of directors Wilson 2 of LBJ Company are responsible for implementing and maintaining effective internal controls. Furthermore, the executive officers and board of directors of publicly traded companies must attest to the adequacy of the internal controls of the company. Failure to comply with the standards of SOX subjects LBJ Company, along with the executive officers and board of directors to severe penalties of fines and imprisonment. The five principles of internal control are the following: * Establishment of Responsibility * Segregation of Duties * Documentation Procedures * Physical Controls * Independent Internal Verification * Human Resource Controls The accountant’s decision to start using pre-numbered invoices...
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...Case Study: LJB Company Internal Control Recommendations There are two primary goals of internal controls. The first is to safeguard its assets from employee theft, robbery, and unauthorized use. The second goal is to enhance the accuracy and reliability of its accounting records. This is done by reducing the risk of errors and fraudulent activities in the accounting process. Public companies are now required by regulations Sarbanes-Oxley Act of 2002 (SOX) among them to formalize control procedures in writing. Privately held companies and other organizations also have an interest in the benefits that result from formalizing and documenting their internal control procedures. Companies must develop sound principles of control over financial reporting and continually assess that the controls are working. The new rules require management to disclose to the public any material weakness identified by management. The report must also state that the company’s independent public accountant who audited the financial statements included in the annual report has attested to and reported on management’s evaluation of internal control over financial reporting. This new attestation requirement under Section 404 expands the scope of the accounting firm’s audit procedures beyond the work required solely to render an opinion on the financial statements (1). Without adequate controls to ensure the proper recording of transactions, the resulting financial data may become unreliable and undermine...
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...Table of Contents Internal Control Requirements………………………………………………….3 Bank Reconciliation…………………………………………………………………..4 Pre Numbered Invoices……………………………………………………………..4 Pay Checks………………………………………………………………………………..4 Indelible Machine……………………………………………………………………..4 Purchasing and Paying for Supplies…………………………………………..4 Human Resources……………………………………………………………………..4 Petty Cash…………………………………………………………………………………5 Assign Passwords………………………………………………………………………5 Review and Evaluation of Internal Controls………………………………6 Purpose It is the policy of the LBJ to maintain an internal audit function as a means of providing all levels of management with information to control the operations, to provide the Board of Directors with information necessary to discharge its responsibilities and to assist management in reaching a conclusion about the overall effectiveness of the system of internal control. First, I will establish the legal requirement needed and the importance of internal controls for an organization. Then I will review the current policies and establish better internal controls for each area of concern. Once these policies have been instituted by the LJB Company, they should be ready to proceed with their plan to go public. Internal control requirements When the company decides to go public the requirements listed below will prove to be very helpful. It is the responsibility of top management to make it clear that the organization values integrity and that unethical activity...
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...LBJ Company: Internal Control Evaluation Accounting 504: Managerial Use & Analysis Case Study 2 Written by: 8/10/13 This evaluation is being presented as an assessment of the preparedness of the LJB Company to go public at a future date. By researching current regulations regarding publicly traded firms we hope to prepare for a smooth transition into the trading market. The Sarbanes-Oxley Act of 2002 (SOX) has established the following guidelines for publicly traded corporations and require adherence for internal controls and procedures for financial reporting. Senior management and executives will be responsible for ensuring that controls are effective and reliable. Outside auditors must periodically verify the accuracy of and adherence to the internal controls. As part of the annual Exchange Act report, an internal control report will generated along with the information recorded during each fiscal year. It is recommended that the LJB Company adopt the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and remain in compliance with the SOX Act. This framework will follow six principles of internal control. 1) Establishment of Responsibility 2) Segregation of Duties 3) Documentation of Procedures 4) Physical Controls 5) Independent Internal Verification 6) Human Resource Controls Bruce Bulmer Consultations has completed its preliminary assessment of the current internal...
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...Case Study 2 ACCT 504 Group A December 2, 2012 LJB Company Internal Controls Evaluation For the President of the company Prepared by Group A Accounting Firm December 2, 2012 Table of Contents: I. Introduction – Stating the Issue II. Body of the Report – LBJ Company Findings and Analysis III. Summary and Conclusions – Findings Communicated to the President and Recommendations IV. Work Cited – References to support Recommendations Introduction: The purpose of this document is to discuss the internal controls and why the principle activities are important for a business to operate effectively. Our goal is to make the necessary recommendations and evaluate the system for future planning. We hope to uncover any issues that will prevent the company’s productivity. We’ll submit our recommendations to correct and improve the current system in place. In conclusion we’ll present our analysis to the President along with the recommendations needed to implement a better system of internal control. Issues: There’s an issue with too much responsibility placed on one employee. The accountant serving as the controller and treasurer creates a problem with documentation as you don’t have anyone to verify cash and revenue is accounted for correctly. It’s too easy for one employee to manipulate the books in his favor without a clear segregation of duties. The accountant is leaving checks in his office during the week exposing sensitive information and increasing...
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...ACCT405: Financial Accounting Instructor Tim Vantuyl 6/8/2014 Case Study 2: LBJ Company Internal Control Assessment By Brian Tucker Student ID D40318643 Table of Contents Preface …..3-5 Body of Report Page …..6 Objectives of Internal Control …..6 Components of Internal Control …..6 Strengths …..7-8 Weaknesses Summary and Conclusion Preface With its introduction in 2002 the Sarbanes Oxley Act was meant to slow and detour the accounting infractions and criminal acts of recent companies like Enron, Arthur Anderson, World Com. SOX has changed the landscape of regulations as it relates to the role of corporate governance in overseeing and verifying the internal function and financial practice of reporting for publicly traded companies. The U.S. Securities and Exchange Commission to mean “controls that pertain to the preparation of financial statements for external purposes that are fairly presented in conformity with generally accepted accounting principles as addressed by the Codification of Statements on Auditing Standards §319 or any superseding definition or other literature that is issued or adopted by the Public Company Accounting Oversight Board” (http://www.sec.gov/rules/final/33-8238.htm). In reviewing the major changes by select sections, leadership and management of the firms should note the following as significant: Section 302 requires officer of the company to review and certify financial reports that the firm generates. They are to verify...
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...LJB Company: Internal Control Evaluation Acct: 504 Case Study 2 Prepared by: Lennard Razor Prepared for: LJB Company 11/29/2014 LJB, 1 Table Of Contents Introduction: LJB Company Assessment 2 LJB Company: The Transition 3 Summary 5 Works Cited 6 LJB, 2 Introduction: LJB Company Assessment The overall purpose of this document is to assess the current state of the LJB Company. This assessment will thoroughly diagnose all of the components, both good and bad, used by LJB Company to help determine the company’s readiness to go public. Upon assessing all of the components and regulations currently utilized by LJB Company, I will also make recommendations for the improvement and future success of this company moving into the public market. In order to properly perform an assessment of the LBJ Company, there first had to be some set of standards or regulations that outline the internal controls and proper procedures for companies and businesses to adhere to for financial reporting. As it turns out internal control is a key component of Foreign Corrupt Practices Act(FCPA) of 1977 and the Sarbanes-Oxley Act(SOX) of 2002 which required companies to follow this set of internal controls. This list of internal controls is as follows: 1). Conduct its business in an orderly and efficient manner, 2). Safeguard its assets and resources, 3)...
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...Case Study 2- Internal Control Improving LJB Company Internal Control ACCT 504 Felix M. Fair October 6, 2012 Table Of Contents: 1. Introduction pg. 3 2. Proper Development of Internal Control pg. 3 3. Effective LJB Practices pg. 3-4 4. Areas for Improvement pg. 4 5. Conclusion pg. 5 6. References pg. 6 Improving LJB Company Internal Control Introduction This paper is an academic work that will define, identify, and explain the use of Internal Control within a company, as well as applying the principles of internal control activities. These principles will be reflected in the use of new requirements, comprehensive feedback of where LJB is currently and where they can be with improvement of Internal Control and the application of its principles. Proper Development of Internal Control What is Internal Control? Internal control makes up all methods that are adopted within an organization to safeguard assets, enhance the reliability of accounting records, increase operational efficiency, and ensure compliance with laws and regulations. [Kimmel (). Financial Accounting [6] (VitalSource Bookshelf), Retrieved from http://online.vitalsource...
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