Acc504 Case Study 2

693 Words3 Pages
Evaluating and Improving Internal Control in LJB Company Introduction Internal control is one of the integral parts of a company. To improve management’s ability to analyze and assess the profitability of their business, we review the already established internal control system and recommend, where needed, improved internal control procedures that defenses against business failure, drive business performance, and to manage risks in achieving the business’s goal. Why Internal Control is Important The overall purpose of internal control is to help an organization achieve its mission, accomplish its goals and maximize profit while reduce risk. An effective internal control system has primary components: * A Control environment * Risk assessment * Control activities * Information and communication * Monitoring In this analysis, we will focus on Control Activities since it is the backbone of LJB company’s efforts to address the risks it faces. The six principles of control activities are as fellows. * Establishment of responsibility * Segregation of duties * Documentation procedures * Physical controls * Independent internal verification * Human resource controls The Sarbanes-Oxley Act In 2002, Congress passed a regulation requires all publicly traded U.S corporations to maintain an adequate system of internal control. Should LJB company are planning to go public, the president must comply to the following: * Corporate executives and boards of directors must ensure that the internal control are reliable and effective * Independent outside auditors must attest to the adequacy of the internal control system Failure to comply is subject to fines, and company officers can be imprisoned. Control Activities The president and the accountant are committed to upholding a strong internal control
Open Document