As a public company, LJB Company will be held accountable and responsible for certain internal controls as established by the Sarbanes-Oxley Act. These controls involve all aspects of operations, finances and personnel. The SOX internal control standards apply to all public companies listed on the U.S. exchanges- New York Stock Exchange and NASDAQ. Internal controls consist of methods and measures utilized by a company to ensure their assets are protected; there is a structured reliability in their accounting records; they can maintain and increase the efficiency of their operations; and they comply with laws and regulations.
With internal controls explained, there are certain areas of LJB’s current operation strategy that are current in the use of those controls. First, we applaud your efforts in retaining personnel because it reduces turnover time and conflicts. Secondly, in establishing the use of pre-numbered invoices, you will effectively maintain accuracy in the documentation controls. Lastly, the purchase of the indelible ink machine would provide security for you and your employees and we recommend that you go ahead with your purchase. All of these efforts LJB has put forth provide a step in carrying out important internal controls.
The objectives of internal controls are broken down into six principles and in order to address LJB Company’s violations, we will only discuss four. The first principle is the establishment of responsibility. The second principle is the segregation of duties. Both of these principles complement one another because it ensures that employees are held accountable and there is no conflict of interest. The recommendation for LJB Company is to hire two more personnel to work alongside its accountant. The delegation of the specific duties such as accounts receivables, accounts payables, ordering supplies and processing payroll