Acct 504 Case Study 2

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“LJB Company…Headed in the right direction” Carl R. Smith Acct 504- Professor Wibbert 2-9-2014 1. To the LJB President: I would like to personally thank you for allowing my accounting firm to evaluate your company’s internal controls system. In my report you will be informed of any new internal control requirements required for LJB to go public as well as inform you of what your company is doing right and make any suggestions on what the company can do to get better. The interest of the company going public will be a very successful decision. 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. While companies in the IPO process are not required to comply with these regulations, in order to prepare for these certifications and audit, it is important to establish, document, and monitor compliance of internal controls as early as possible. 2. One practice the LJB is doing right and should continue to do is the use of pre-numbered invoices. This prevents transactions from being skipped over or recorded more than once. The use of pre-numbered invoices employs the control activities component of internal control. It helps in making sure that no fake checks are made and checks can be tracked easier this way due to

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