Case Study #2: Internal Control Most companies that start off as a private corporation want to ultimately become a public company in the future. Becoming public usually provides businesses the opportunity to raise capital in hopes of expanding. There are definitely some pros in becoming a publicly traded and owned entity. LBJ Company is considering going public in the future, and they are requesting the writer to evaluate their internal control systems. They would also like to be made aware of any new internal control requirements if they decide to go public. Lastly, they would like to know what they have been doing right and what they have been doing wrong, and whether or not they should purchase the indelible ink machine. The writer
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These components must be kept in mind and obviously have been to some degree seeing as though they fired the employee who was viewing pornography on company time and computers. This could potentially make for big problems for the amount of shares the company sells if it goes public. Another thing that LBJ is doing correctly is seeking advice from an outside company. This provides LBJ the opportunity to evaluate its SWOT as it pertains to going public.
Although there are things that LBJ is doing right, there are definitely some things that are being done wrong that must be corrected immediately. The first thing that LBJ did wrong was to staff one accountant and assigns him to multiple job assignments. The principle that applies to this error is segregation of duties. The rationale for segregation of duties is the work of one employee should, without duplication of effort, provide a reliable basis for evaluating the work of another employee. The fact that the accountant serves as a treasurer and controller, this could potentially be a conflict to the organization. The accountant also is responsible for purchasing supplies and paying for those supplies. These are too many responsibilities for one individual; especially the one individual responsible for handling the company’s money.
The second thing that the company is doing wrong is allowing all