Case Study 2 Acct 504 Essay example

642 Words Jan 17th, 2013 3 Pages

Dear Mr. President

I want to first start off by saying thank you for the opportunity to handle such an important and sensitive matter such as the internal control for the LJB Company. First and foremost I want you to be aware of the requirements of your company if you do decide to go public. The Sarbanes-Oxley Act of 2002 (SOX) which was passed by congress requires all publicly traded U.S corporations to maintain an adequate system of internal control. Corporate executives and boards of directors like yourself must ensure that these controls are reliable and effective. In addition, independent outside auditors must attest to the adequacy of the internal control system. Companies that fail to comply are subject to
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The person responsible for reconciling the petty cash should do so randomly to deter its abuse.
As far the indelible ink machine I see no problem printing your own checks as long as you use pre-numbered check stock paper to write the checks. Otherwise you will not know that you have accounted for every check written. Also, this is an area of responsibility that should be segregated. The person responsible for printing the checks should not have the authority to sign them. This will help insure they are not writing checks to themselves. LJB should consider purchasing the indelible ink printer once they have the manpower to have the duties segregated. By using indelible ink, the checks printed will be harder to change once printed, which is a good physical control of cash.
Paycheck Lock-Up: Although the accountant is locking the employee’s paychecks over the weekend, he should actually be locking them at all times. Anytime the accountant steps away from their desk and these checks are not locked, sensitive employee information is vulnerable.
Background checks: I recommend that LJB implement the Human Resource control of conducting background checks of all employees before officially hiring. This way they will discover if the potential employee has a past that could negatively impact the company (fraud, theft, other criminal activity)
Passwords: Passwords are a key

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