Case Study 2 FI504 Accounting and Finance for Managerial Use and Analysis Recommendations for LJB Company: Requirements for Going Public: A requirement of all publicly traded companies is to comply with the Sarbanes-Oxley Act of 2002. This means that LJB would be required to maintain a system of internal control. The controls must be reliable and effective, which the executives and Board of Directors must monitor. Also, an outside auditor must confirm that the control systems are
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ACC 504 Case Study 2 DeVry Keller School of Graduate Management Publicly Traded Companies Internal Control Requirements Becoming a publically traded company is a big decision. LBJ would have to weigh the cost versus the benefit. Investors want accurate records of the company’s earnings and finances. There are certain rules that a publically traded company must adhere to in order to be in compliance with the Sabarnes Oxley Act or (SOX). For smaller companies with less than 125,000,000 in revenue
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Internal control plays a very important role in preventing and detecting fraud, also helps to protect the company’s resources and helps to achieve specific goals or objectives. The company, using internal control in compliance with Sarbanes-Oxley Act and regulations, looks more trustful and stable for investors. Internal control has five elements the company should consider before going public and everyone in the company has responsibility for internal control to some extend. The top managers of
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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
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will inform the president of the new internal control requirements necessary if the LJB Company is to go public. This proposal will also inform the president of the already properly functioning internal controls, and the purposed purchase of the indelible ink machine. Finally, this proposal will inform the president as to the internal control measures which are not being taken, and thus inadequately protecting the company from becoming a victim of fraud. These topics will covered in order to exemplify
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the areas down into the following categories: 1. Internal Control Requirements - After numerous corporate scandals came to light in the early 2000s, Congress addressed this issue by passing the Sarbanes-Oxley Act of 2002 (SOX). Under SOX, all publicly traded U.S. corporations are required to maintain an adequate system of internal control. Corporate executives and boards of directors must ensure that these controls are reliable and effective. In addition, independent outside auditors must
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followed the “potential penalties for altering documents can be up to 20 years in prison. In addition, anyone knowingly violating any provisions of Sarbanes-Oxley or SEC rules can be subject to a fine and up to 10 years in prison.” In order to go public all companies must follow the Sarbanes-Oxley requirements. These requirements were created and put into place “to protect shareholders and the general public from fraudulent practices and errors in accounting on multiple levels.” Listed below are the
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Congratulation LBJ Company on your decision to go public; this decision increases your company’s opportunities to raise capital for financing business plans, capital expenditures, and growth. To ensure that corporations and employees conduct business securely and ethically, and to restore public confidence and trust in the financial statements of companies whose stock is traded on public exchanges; the Public Company Accounting Reform and Investor Protection Act of 2002 (SOX) was passed. This document
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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
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distributor, is planning on going public in the future and has asked Lexary Accountants, Inc. to assist in this process by evaluating their system of internal control. The organization is committed to its customers and works to minimize waste by focusing all of its resources on producing the best possible value for customers, and being a lean organization, their investments are carefully considered and only made when it is clear that a long-term financial advantage exists in doing so. In going public,
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