Introduction: Presented in this evaluation of LJB, I would like to address what internal control regulations this company will need to follow in its plan to go public including standards set forth under the SOX Act, what areas the company has successful internal controls in place, and what departmental processes need more efficient internal controls put in place. By doing so, I think you as president can make LJB a more secure company and avoid many of the risks it is taking leading to fraudulent activity.
Internal Control Requirements: My first area of concern when analyzing the LJB company internal controls, is what is going to be required for this company to become pubic and listed on U.S. Exchanges. In order to do this, we will discuss the standards put in place by the Sarbanes-Oxley (SOX) Act. Under the SOX Act, management must now certify the accuracy of financial information. This will require managers to perform tests and prepare statements showing the effectiveness of the design and integrity of its internal controls over financial reporting. This will be very important for the company to not incur severe penalties for fraudulent activity being ignored according to SOX standards. The SOX act also affects how external auditors perform assessments of the company’s financial reports. It will require external audits to include a traditional and an independent opinion of the company financial statements. Management will be held responsible for ensuring that an annual attestation report is prepared as a result of these audits to stay compliant with the SOX Act (Paul D. Kimmel, 2013).
Aside from what the SOX Act regulates as to what a company’s internal controls standards should be, it is important to know the purpose of internal controls. Internal controls are used to establish responsibility, enforce segregation of duties among your employees, establish