LBJ Distribution Company Internal Control Policy Prepared for: The President Prepared by: Date: April 7, 2013 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.
March 26th, 2012 To: President of LJB Company From: Erica Sylvester Topic: Discussion of Internal Controls-New Internal Controls Mandated if Company Goes Public, Current Good Practices and Suggested Improvements 1. New Internal Controls required if company decides to go public: a. If your company decides to become a publicly traded entity, then you will fall under the Sarbanes-Oxley Act (SOX) that requires for all traded U.S. corporations to maintain a system of internal controls that are ensured by executives and the board of directors to be reliable and effective. Independent and outside auditing will be required to check and attests to the adequacy and stringency of the internal control systems (1). Under SOX, your company will also be required to track your employees’ degrees and certifications to ensure that they meet the requirements of their job.
Internal control ACCT504 Financial accounting and Managerial use, analysis Keller Graduate school of Management Professor : Linval Frazer Week 5: Case study 2 Friday , April 4, 2014 Preparing LJB’s Internal Control Reporting for Public Trading Background LJB Company , a small business local distributor who understands to go public in the future, the company should be in accordance with the law and may need to take more stringent internal control principles . At the request of the president , an independent internal evaluation of internal controls was conducted to evaluate the direction of strength and weakness. Objective The objectives of this report should evaluate the existing controls and make recommendations that will ensure the companies assets and help get the most accurate financial information. Based on a system of internal checks and balances will be just in my recommendations to the president of the company, since most of the internal control systems provide for independent internal control; This principle involves the review of data prepared by employees. To get the maximum benefit from an independent internal control : Control values and Integrity from the top make it clear that it is unethical activities will not be accepted , and set the tone for the company's culture .
Some tests have to be properly administered to do so. The Sarbanes Oxley act of 2002, requires the CEO and CFO to certify in periodic filings with the SEC the accuracy of the financial statements and the effectiveness of the company’s internal controls over financial reporting. The outside auditor is required to audit certain companies internal controls over financial reporting on an annual basis. There are phased in compliance dates for these requirements for certain smaller company filers. Company’s in the IPO process and newly public companies are not required to provide either a management assessment or an auditor attestation report until they file their second annual report with the SEC.
. . the crucial enforcement mechanism is the citizen-suit provision, which authorizes civil penalties and injunctive relief. This provides that “any person may commence a civil action on his own behalf against [a]n owner or operator of a facility for failure, among other things, to [c]omplete and submit an inventory form under section 11022(a) of this title [and] section 11023(a) of this title. “ As a prerequisite to bringing such a suit, the plaintiff must, 60 days prior to filing his complaint, give notice to the Administrator of the EPA, the State in which the alleged violation occurs, and the alleged violator.
Companies and their independent accountants or auditors should report the effectiveness of the companies internal controls based on these six principles. Publicly traded companies or those planning to go public are required to maintain internal controls and ensure compliance of government regulations. Company Evaluation As it relates to internal controls, the LJB Company is meeting and or adhering to some of the regulation requirements of the Sarbanes-Oxley Act within the daily operations of the business. I have provided a list below of the current processes being used within LJB Company that are being done exceptionally well. Establishing Responsibility: It is important to designate only one individual to handle specific tasks.
Congress passed the Sarbanes-Oxley Act in 2002 that states in Sec. 406, that companies are required to tell if they have created and accepted their own code of ethics and anything else pertaining to the said code. Agreeing to the code is voluntary for companies that are held privately but some chose to also adopt and disclose their code of ethics as well as require their suppliers and service providers to reveal the code of ethics they developed (Mendes, 2006). Business code of ethics procedures should be specific for handling ethics for employees, interest conflicts, trading on the inside and discretion (Business Code of Ethics, 2005). Code of ethics to be effective for a company must be in writing and is agreed on by all employees, executives, managers, and directors and must be signed each year to comply with changing laws and policies and to be certain they are still in agreement with the laws (Business Code of Ethics, 2009).
The board of directors is responsible for overseeing and exercising corporate powers and certifying the company’s business affairs while managing the goals and objectives for long-term interests of the shareholders. Organizational Annual Report and SEC Filing The SEC requires publically traded companies to file annual financial reports, and these reports are open to the public. Investors are interested in these reports because it helps in determining the financial health of a company. As a means for providing guidelines, principles, and objectives for the financial markets in the United States, the Sarbanes-Oxley Act of 2002 enhances the SEC’s roles for reforming corporate accountability. This also includes establishing a private-sector regulator to oversee the auditing profession to combat accounting fraud, and enhancing financial disclosures.
Society as a whole is responsible to conduct business ethically. Parallel to the formula that we use for inventing the laws that a society created to promote specific behaviors and actions that are appropriate to build trust and relationship, it is similar in corporations' behavior. According to Svensson & Woods "Society does have expectations of business and of its business leaders" (Svensson & Woods, 2008, p. 306). Ethical business behavior is a combination of values and normative ethics, which drive an organization. When analyzing Anglo-American and Primark for this case study.
The idea of checks and balances are central to the federal government. Checks and balances is a system of government in which each branch (executive, judicial and legislative) exercises control over the actions of the other branches of government. The legislative branch of the government (otherwise known as congress) carries out the checks on the executive (the president). An example of this is the power congress have to amend, block and even reject pieces of legislation. An example of this is the events of 2013 when congress blocked Obama’s attempts to control gun ownership.