Running header: Internal Controls
LJB Company: Internal Controls Summary
President of LJB Company
– AMS Consultant
February 9, 2014
ACCT504 Accounting & Finance: Managerial Use Analysis
Table of Contents
Internal Control Requirements 3
LJB Company: Current Internal Controls 4
LJB Company: Recommendations for Change to existing Internal Controls 5
AMS Consultants would like to handle re-organization of LJB Company’s internal controls prior to the organization going public. There are several existing issues within the organization that will need to be address prior to making any significant changes to the ...view middle of the document...
Below, Linda (AMS) will explain the current process and measurements that can continue within LJB and she will analyze what changes will need to occur immediately to ensure that LJB Company is ready to go public.
Internal Control Requirements
Internal control systems consists of primary components such as: a control environment, risk assessment, control activities, information and communication, and monitoring. LJB Company president is responsible for ensuring employees that the organization values integrity and any unethical activity will not be tolerated. Currently, LJB Company does not have a risk assessment in place to help identify and analyze the various factors of current risk for the organization; this must be conducted immediately by the account and consultant. Linda (AMS) will set up control activities to help reduce fraud which will consist of policies and procedures for how petty cash is stored, handled and documented when used. Linda (AMS) will set up a communication log that will help document any financial activity within the organization and will set up a standard automatic e-mail notification that will inform employees of any and all changes made within the organization and how everyone will be trained to ensure that they are utilizing and enforcing all changes. Set up of security monitoring system that will help monitoring activity within the accounting department as well as areas that handle and use petty cash.
LJB Company: Current Internal Controls
LJB Company current internal controls are based on the organization having so much faith in their long-term employees so therefore the organization does not have much security measures or monitoring in place. The current accountant works alone and serves as treasurer and controller of all LJB Company processes; the accountant has recently started using pre-numbered invoices and want to upgrade to an indelible ink machine to print their checks. The petty cash process allows easy access by all employees being that it is stored in a drawer and the only requirement is to leave a note if petty cash is used.
Linda (AMS) continues to review LJB Company current internal controls such as the use of only one accountant which is not a good option because there should be at least one other person that validates the books. The accountant has more of an opportunity or financial pressure to commit some type of fraud within the organization because there is not anyone else that is monitoring and validating the books. Accounting records are essential and important to be maintain to the upmost integrity because the organization could collapse for mishandled bookkeeping within any organization. The advice of the accountant to use the indelible ink to print checks is a great option for tracking purposes.
LJB Company: Recommendations for Change to existing Internal Controls
Linda (AMS) recommends that the organization install...