Internal Controls Essay

753 Words4 Pages
President of LBJ We appreciate you utilizing our services. A complete evaluation of LJB’s Internal Controls has been conducted. If LJB Company decides to go public the company would be required by Sarbanes-Oxley (SOX) to maintain an adequate system of internal controls and procedures. The six components of internal controls that would be required are: • Establishment of responsibilities • Segregation of duties • Documentation procedures • Physical controls • Independent internal verification • Human resources controls (p338) During the recent review of LJB Company, I found the company is conducting business activities that are in compliance with two of the six internal control measures. The fact that payroll checks are kept in a locked safe during non-business hours is an excellent security procedure. This activity would be in compliance with physical controls. As a result, there is a limit access to company funds that will be prevented from theft. The second activity that I found to be in compliance is the use of pre-numbered invoices. The pre-numbered invoices would meet the standard under Documentation Procedures .This activity will help prevent duplicate transactions or transactions from not being recorded. I would highly recommend the purchase of the indelible ink machine for check printing. The indelible ink machine would meet the compliance standards under Physical controls. The use of the machine to print checks would be safe guard against the forging of unauthorized signatures and a better control of check numbers. Unfortunately, my review has found several activities that LJB Company is in violation of Sarbanes-Oxley (SOX). I want to make you aware that granting access to all employees to the petty cash is in violation of the establishment of responsibility internal control procedures. As outlined on Kimmel, Weygandt & Kieso

More about Internal Controls Essay

Open Document