Essay Fi 504 Accounting and Finance: Managerial Use

667 Words Apr 2nd, 2012 3 Pages
If LBJ Company decided to go public they would have to follow the Sarbanes-Oxley Act of 2002. Under this act LBJ Company would be required to keep an adequate system of internal control. If a company is found to be out of compliance of this law they are subject to fines and possible imprisonment for its officers. LBJ Company would also have to have outside auditors attest to the adequacy of its system. In order to create a good system of control LBJ Company needs to meet 5 primary components. A control environment, risk assessment, control activities, information & communications, and monitoring.
Currently the company is doing a good job in some areas for example using pre numbered invoices, reconciling its bank statements, locking
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Anyone could come in take another employee’s check and have it cashed without the company knowing who for a long period of time. Paychecks should be under the control of at least one person and locked und3r dual control at night. They should also be signed out when an employee comes to pick it up. Other options are offering direct deposit or mailing checks to the employee’s homes. Another area of concern is the hiring process LBJ Company. It’s great that both the president and accountant team together to interview new associates but there needs to be more to the hiring process to limit the liability to the company. LBJ Company should run background checks on all new associates or at the very least check references and the job history of applicants before making a job offer. I would also suggest the company issue individual logins and passwords for its associates as well as limit the content they are available to view. Associates should only have access to information necessary to do their job. If unlimited internet access in not need to do ones jobs then keep a list of approved sites to help them do their job, or at the very least a list of prohibited sites so that associates cannot obtain access to anything the company would deem inappropriate. Lastly the petty cash needs to be controlled. One person should be responsible for the control of the petty cash and it should be kept in a locked box. I would suggest sign out sheet be kept by the controller. It should state

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