Case Study 2- Internal Control

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To the President of LJB: It is critical to note that going public is a phenomenal and transformational event for any company. However, before any private company makes the final decision to go public, there are important decisions that needs to be made; one of them being the enforcement of proper internal control procedures. LJB will need to “meet additional requirements and continuing obligations as a public company that may require new skills sets, additional resources and changes to the business” (PricewaterhouseCoopers, 2010). This simply means that the company needs to implement internal control measures that will satisfy the requirements of the Sarbanes-Oxley Act of 2002 (SOX) section 404 and meet the entire five interrelated internal control components. Mr. President, everyone at LJB needs to understand the definition of internal control and what is required of them under the SOX law since this law requires a combined effort from top management and employees alike. Internal control “consists of all the related methods and measures adopted within an organization to safeguard its assets, enhance the accuracy and reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations” (Kimmel, Weygandt & Kieso, 2009, pp. 327-328). In other words, effective internal control can help companies achieve established financial goals, prevent loss of resources, and prepare reliable financial statements. Under SOX, all publicly traded U.S corporations are required to maintain an adequate system of internal control by means of developing principles of control over financial reporting as well as continually verifying that these controls are working. LJB needs to ensure that it corporate executives and boards of directors’ controls are reliable and effective. Additionally, independent outside auditors must attest

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