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Case Study 2 Acct 504

1018 words - 5 pages

Case Study 2- Internal Control

Improving LJB Company Internal Control
ACCT 504
Felix M. Fair
October 6, 2012
Table Of Contents:
1. Introduction pg. 3
2. Proper Development of Internal Control pg. 3
3. Effective LJB Practices pg. 3-4
4. Areas for Improvement pg. 4
5. Conclusion pg. 5
6. References pg. 6

Improving LJB Company Internal Control
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This section outlines reporting on internal controls over annual financial reporting. There are four key elements that must be included in reporting:

* Statement of Responsibility by Company Management (the CEO and CFO) for establishing and maintaining an adequate internal control structure and procedures for financial reporting.
* Statement identifying the framework used by management to evaluate the effectiveness of the Company's internal control over financial reporting.
* Management's Assessment of the effectiveness of Internal Controls over financial reporting.
* Attestation by the company's external auditor on Management's assessment of the effectiveness of the company's internal controls and procedures for financial reporting.

Effective LBJ Practices

LJB has established a strong relationship built on faith in its long term employees. This is a value added benefit to the organization and reflects well to potential investors. Using pre-numbered checks and making sure they are placed in the safe over the weekend are also positives in LJB business practices. These policies are viable and continuing to maintain these policies are beneficial to and for LJB.

Areas for Improvement
There are a few practices that LJB will need to address to improve internal control. By addressing these practices, LJB will only enhance the positive policies that are already in place. This will also, make the organization less susceptible to fraud and the occurrence of unethical behavior.
The rationale of segregation of duties is this: The work of one employee should, without a duplication of effort, provide a reliable basis for evaluating the work of another employee.
[Kimmel (). Financial Accounting [6] (VitalSource Bookshelf), Retrieved from]
The applicable example of this is LJBs’ accountant. As the person in charge of purchasing the accountant should not be handling the payment of checks or reconciliation. Also, the accountant should not be in charge of petty cash since he does the monthly reconciliation. Segregating duties makes more than just the one person responsible and lessens the risk of something fraudulent or unethical happening that could go unnoticed because just one person had means and access.
All employees should not have and do not need access to petty cash. This puts LJB and...

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