Case Study 2 – Internal Control
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Case Study 2 -Internal Control
By Keith Salmon II
From the information I have gathered about the LJB Company. If the company decides to go public new internal control requirements procedures (such as control environment, Risk assessment, Control activities, Information and communication Monitoring), need to be implemented. This is done to not only protect the company from fraud and abuse but also be in accordance with the law.
Upon the initial review of the LJB Company the company I have found that the company in general is doing various things well. An activity such as keeping the checks in a locked safe is a good security procedure. It limits access company funds and protects it from theft. Have pre numbered checks in my opinion company is a good procedure as well. I would recommend the purchase of the indelible ink machine used for the purpose of printing checks. Using the indelible ink machine applies to the internal control procedure of using physical control. Using that machine to print checks can undeniably help prevent fraud by someone forging someone else signature.
Unfortunately in my review of the company I have found activities that the company is participating in that violate standard regulated internal procedures. Giving all employees access to the petty cash is in violation of the establishment of responsibility internal control procedure. That leaves any employee the ability to use petty cash for any means. An accountant that is working for the company is currently the controller and the treasure. This activity violates the segregation of duties internal control procedure. There should be different individuals responsible for related duties. Having on individuals responsible for treasurer and controller could boost optional errors and irregularities. I recommend another person share the responsibility in this activity. On payday employee checks should not be left in an office to be picked up. That violates the physical control procedure of cash disbursement. I recommend on payday that employee checks should be locked up in a safe or similar secure storage device. Individual computer password should be created for all employees instead of sharing just one. That provides independent internal verification so Discrepancies and exceptions can be reported and employees held accountable.
Work Citied
Kimmel. Financial Accounting. 6. VitalSource Bookshelf. John Wiley & Sons, , Sunday, February 05, 2012. <