Internal Control Essay

432 Words2 Pages
Public companies are required by regulations Sarbanes-Oxley Act of 2002 (SOX) to formalize control procedures. Companies must develop principles of control over financial reporting and continually verify that the controls are working. Companies will do additional work on designing, testing and auditing of controls if they decide to go public the new rules require management to disclose to the public any material weakness identified by management. The company’s independent public accountant who audited the financial statements included in the annual report has attested to and reported on management’s evaluation of internal control over financial reporting. From my understanding, the following are common recommendations for new internal controls: - Establishment of responsibility - Segregation of duties - Documentation procedures P - Physical, mechanical, and electronic controls I - Independent internal verification - Other controls Good practices LJB recognizes the efforts of long term employees by rewarding them with additional responsibilities. It shows that employees are valued. LJB has some physical controls to secure checks from being mishandled or stolen. Example uses vaults and safety deposit boxes for cash and checks. Also computer facilities access with password. Documentation procedures are used well. Accountant uses pre-numbered invoice for transactions and completing monthly bank reconciliation are best practices. Weak practices LJB has much work experiences, but these influenced to you make errors, both intentional (fraud) and unintentional (mistakes). Segregation of duties: The accountant serves the roles of the Treasurer and Controller, which is a violation of the Establishment of Responsibilities control. This control says that the employer is responsible for given task is most effective. Segregation of Duties is also being

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