'Internal Control Essay\r'

'The LBJ fraternity is presently making a decision to go semipublic or not and with that The LBJ club pass on as well need to become knowledge qualified roughly their versed manages within their constitutions, specific entirelyy in regards to history and overly Human Resources and how it depart affect them and their employees and of passage how they conduct business.\r\nThere contribute been some all overbearing and negative nationals arise in regards to their inhering controls. However, the LBJ Comp both needs to be acknowledged for what they be doing right, and volition also need to address the issues that atomic number 18 negatively affecting them and their business and will save to negatively affect them if they arrive up wholenesss mind to go public, which will drive down the cost of their sh ares etc.\r\nThis upshot study will review these items as good as make pressations for what the LBJ Company potbelly do to tighten up their national controls. \r\nPart 1: upcountry Controls Requirements Inform the President of any parvenue internal control requirements if the society decides to go public.\r\n inbred controls are mechanisms, policies, and procedures used to minimize and monitor practicable risks. In order to deter employees from committing a shoddy or fraudulent act the controls must be thorough and comprehensive. However, internal controls by themselves are not enough. They will be effective only if they are reinforced through refining, policies and procedures, information systems, training, and supervision of staff.\r\n* The primary quill objectives of internal controls are to: Internal controls assistant to endure reliable data by ensuring that information is save in a consistent bureau that will completelyow for useful financial reports * They also help prevent fraud and loss by safeguarding assets and inborn records. * Internal controls promote operational efficiency by reducing unnecessary duplication of effort and guarding against misallocation of resources. * They assist adherence to management policies and funding source requirements. Internal controls can be broke down into dickens categories- accounting and administrative controls, which is exactly what the issues are with the LBJ Company. (Internal Controls Checklist)\r\n check to the Sarbanes Oxley Act of 2002, all publicly traded U.S. corporations are infallible to maintain an adequate system of internal control at all times. As LJB Company President, he or she should be mindful that a controlled purlieu must be present at all times, and â€Å"that unethical activity will not be tolerated.” The LBJ Company must identify and analyze the various(a) factors that could develop risk for the business and how the team can manage those risks. The overall internal control system needs to show and communicate all discriminate information within the organization, to en authentic that the communicated information has rea ched the organization. agree to the textbook, â€Å"It is very important to study testing and auditing of controls to arm a long lasting organization. (Kimmel, 2009)\r\nPart 2: What the Company is Doing Right? Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the unerasable ink machine. When you advise the President, please be accredited to reference the applicable internal control ruler that applies.\r\nThe company has been doing well by creating a counterweight environment for employees, due to the long-term employees that are currently there is an excellent thing for LBJ Company. From what is cosmos shown, the theater directors and employees need a great balance, which keeps good control and promotes a team oriented environment within the company. some other good thing is that the accountant is in force out of the checks and also stores them into safe in his offi ce, but the manager should render the only key to the safe to ontogeny the monitoring of the checks and would also create a checks and balance system.\r\nPlus if the accountant is not there for any(prenominal) reason and an employee needs their check, the manager can cut through that and not violate any employment laws by not giving an employee their check in a timely manner. The President of LJB Company, has also done a good thing for wanting the employees to be aware of any new regulations required of the company if they decide to go public. It is incredibly important the President have different souls serve as an accountant, trea certain(a)r and mastery which will help streamline many of their processes. This way, the Accountant will not be responsible for all financial dealings and again this will create checks and balances which are required to go public.\r\nPart 3: Advise the President of what the company is doing wrong (they are definitely doing some things poorly). Ple ase be sure to include the internal control rule that is being violated along with a recommendation for improvement. (20 points) This web site for LBJ Company has shown that it is in clear violation of the internal control principle and is running significant risks by not including to a greater extent than oversight and checks and balances. First of all, that they have one accountant who plays the role of both financial officer and Controller is an area of great risk. The Controller and treasurer are meant to play opposite roles in which they fork up oversight and checks and balances to the other. The twain positions should be filled by separate employees, and this change should be implemented as soon as possible.\r\nIn the current setup, the one accountant has too much power over the processes. Another issue is the cash drawer principle also leaves the company vulnerable to fraud and consumption of funds. For example, even if a company employee were to act independently, an employee could slow remove a substantial amount of unauthorised funds, and it would be difficult, if not impossible, to find who did it as any of the company employees could have been culpable. An example of the problems that arise from the namelessness that company employees have within the organization, is clearly exemplified in the case of the worker who was fired for viewing pornography on the company figurer. Not only does this stash away risks of damaging corporate reputation, and download viruses, but it also highlights how the lack of someone user accounts and accountability makes it so that one employee can hide their malicious actions with anonymity. under are some recommendations for the LBJ Company. Recommendations:\r\n1) To introduce a culture of corporate responsibility, the CEO should begin to implement individual user accounts for its computers, as well as a formal cash dealal system, that requires that company employees usher themselves with another person o r a computer system.\r\n2) The role of the one accountant who acts as Treasurer and Controller must be separated into two so as not to violate the internal control principle, and in order to minimize the likelihood of fraud.\r\n3) The checks should not just be left at the accountant’s office, but in a safe where only two people have access such as the accountant and the manager. That way more than one person is responsible.\r\n4) The accountant taking checks home over the weekend is a trade protection issue as well as introduces more opportunity for fraud. This practice must be stop and more safeguards put in place. This also is an issue regarding personal identifying information on the checks of the employees and if the checks become befuddled or stolen, then that information is available to the public now.\r\n5) The accountant also being involved in the interview process for new employees is disturbing because of the direct of control he has over critical aspects in the company’s day to day business. If he were to hire an accomplice, he could easily use that individual and his position in order to manipulate accounts and withdraw significant funds from the company before he is ever caught. 6) The HR Departments should also run more thorough background checks as part of their hiring processes. (Bell, 2010)\r\n expiration Now that the LBJ Company has received the recommendations to fix the issues with their internal controls, they will no doubt be able to go public and be successful. The LBJ Company should also re-evaluate their processes every so often to make sure that these new systems for their internal controls are successful. They should re-evaluate every so often in case they need to make changes as well.\r\n'