To: The President of LJB Company
Recommendations on Internal Control Policies at LJB Company.
The recommendations herewith are designed to give assistance the President of LIB Company to establish the presence of integrity, ethics, competence and a positive control environment.
After an audit of the existing policies of control in LJB Company, these are the finding of some points to improve. The predisposition is to optimize the procedures and the results to offer further effective service to your customers
1-Pursuant to the Sarbanes-Oxley Act of 2002 (the Act) it is mandatory for SEC registrants and their independent auditors to report on ...view middle of the document...
e. warehouses and storage cabinets for inventory and records. Use alarms to prevent break-ins. Use cameras and television monitors and item sensors to deter theft should the case apply. Time clocks should be used for recording time worked.
Other commendable internal controls at LJB is LJB’S promotions. Promotions in a company is a clear cut indicator that the company’s internal controls are already in place in the personnel/ establishment of responsibilities sector- Establishment of responsibilities are a major part of internal control. Personnel that get promoted shows to be competent and trustworthy. Additionally, it’s a major employee incentive.
My recommendation: Job establishment of responsibilities comes with clearly established lines of authority and responsibility documented in written job descriptions and procedures manuals. Organizational charts may provide a visual presentation of lines of authority and periodic updates of job descriptions ensures that employees are aware of the duties they are expected to perform. Also, periodic reviews are to be conducted of employee performance.
3- Separation of duties in LJB Procedures is has not found to be currently in place:
This section is detailed to address the issues of the accountant who serves as a Treasurer and a Controller and all of the mix of his duties. They are contrary to safe internal control.
Separation of duties is a crucial internal control model. No single individual should have control over an entire transaction. The duties of authorization, custody of assets and record-keeping should be the responsibility of at least three different individuals. . (I.e. In order to obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by an employee who has no other responsibilities related to cash.) Responsibilities are considered to be unsuited if an employee is able to execute and conceal errors and irregularities in the course of performing day-to-day activities without detection. If adequate separation of duties is not possible due to lack of sufficient staff, vacations, etc., then there should be written evidence of increased supervisory oversight. The formal organization of separation of duties must not be over ridden by the informal day-to-day structure.
Separation of duties limits the possibility of problems arising due to incompatible duties. Collusion can occur, invalidating the control procedures in place. The manager needs to be aware of co-worker relationships, as well as relationships outside the office, and be alert to the possibilities of collusion.
4- Recommendations for the Payroll Check Signing and Check Processing:. Encourage all employees to have direct deposit. Many banks have free checking accounts for people who have their paycheck deposited. If the checks are to be hand delivered, then there should be a supervised log sheet so that each employee signs when picking up the sealed envelope with check. Have the...