Case Study 2:
DATE: October 6th, 2013
SUBJECT: The need for Internal Controls
We would like to thank you for the opportunity provided to us in evaluating the internal control systems of your company.
As you know, internal control systems are paramount to securing the assets of any company or organization. In your case Control System will play an important role in limiting the risk of fraud or asset misappropriation. Internal controls ensure accuracy and reliability in accounting data, and secure policies within the organization.
We have analyzed the internal controls of LJB Company and the section below summarize our findings. As ...view middle of the document...
In addition, an independent auditor must perform independent tests of controls, report and attest to management’s processes and on the effectiveness of the internal controls. By signing the attestation, the executives signing the report are held personally accountable for accurate and complete financial reports and for complying with all the requirements set forth by SOX. The company, you, will be responsible for complying with the requirements or for material misrepresentations in the reports as attested to be true.
This new attestation requirement under Section 404 expands the scope of the accounting firm’s audit procedures beyond the work required solely to render an opinion on the financial statements. Without adequate controls to ensure the proper recording of transactions, the resulting financial data may become unreliable and undermine management’s ability to make decisions, as well as its credibility with shareholders, regulators, and the public.
From our research LBJ company has a great track record as a local distributor, the company is performing well financially. The document controls the accountant has set in place in regard to pre-numbered invoices and physical controls of locking the payroll checks in the office safe when he is not there meets the SOX requirements. The leadership is taking proactive steps to find the pitfalls in the current system of internal controls and remedy any inaccuracies and/or miscalculations that may arise.
The new rules require management to disclose to the public any material weakness identified by management. The report must also state that 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.
Our recommendation is to get the indelible ink printer due to the overall cost effectiveness. However, to reduce the cost even further establishing a policy for all employees to receive their payroll checks via direct deposit. The following information will reduce potential fraudulent activity when using an indelible ink printer:
Many businesses print their own checks because it saves time and money. A company can print payroll checks for employees and payment checks for suppliers. While self-printing can save money, it can also increase the chances of fraud. Payroll check security can be achieved by following a few simple guidelines:
* Always use the correct equipment. In order to maintain the integrity of payroll checks, you should use MICR technology. Use a MICR printer with MICR toner to print checks. This makes the checks easier for the bank to process and more difficult for criminals to duplicate.
* Only print on blank check stock. Using pre-printed check stock makes it easy for criminals to steal checks and then simply fill in the blanks.
* Only allow a small number of people access to check printing utilities. In order...