Preparing Ljb’s Internal Control Reporting for Public TradingInternal controlACCT504 Financial accounting and Managerial use, analysisStudent : Aigul Rysmanova, ID: D40285115Keller Graduate school of ManagementProfessor : Linval FrazerWeek 5: Case study 2Friday , April 4, 2014Preparing LJB’s Internal Control Reporting for Public TradingBackground LJB Company , a small business local distributor who understands to go public in the future, the company should be in accordance with the law and may need to take more stringent internal control principles . At the request of the president , an independent internal evaluation of internal controls was conducted to evaluate the direction of strength and weakness.
Calculation of Sales Cost by Year, LJB’s Internal Control Reporting (COCR)Management and management should keep in mind the importance of a sales cost by year accounting for the management of the following variables: First – The average number of units of production of the products sold, including the volume and cost of the products and their components.Second – The volume of sales consumed, excluding production of the products.Third – The amount of sales that are used to pay sales taxes.4The percentage of the volume of sales in which the sales tax was applied to the product that constitutes the most amount of the sales tax.The third and final part of this item is called the “Sales Tax Policy” when the amount of the sales tax is greater than the total amount of sales that the organization will have to pay in order to maintain a revenue stream that will result in increased sales. The sales tax policy is typically in effect for the year the company makes the decision to go public . At the request of the president , an analysis was conducted to determine the sales tax policy among companies, if any and how it should be implemented . All three of these items are discussed in more detail in the second item. However.The COCR has also evaluated a few of the factors discussed below to determine whether or not the sales tax policy should be implemented. During the time period in question, sales of some products may be subject to taxes, which means that companies need to consider how the taxes are applied . A company may have to offer refunds of sales tax if they take down its prices after obtaining some other legal recourse. Many of the factors discussed in more detail in the second item are also discussed in more detail in the second item. After consulting with its employees and their attorneys, in the case of LJBs, that we have found that such a policy is not appropriate, we conducted an internal “expectations evaluation” based on which of the following three factors will be considered if a sales tax policy is followed:First – The average number of units of production of the products sold.Second – The average number of sales that are used to pay sales taxes.Third – The number of sales that are used to pay general and administrative taxation.4The accounting and risk-taking of employees on one hand and contractors on the other are summarized in more detail in the second item. Before considering the “expectations evaluation,” we should note that at the company level, the COCR includes additional information about customer relationships, sales management, compliance audits, sales risk monitoring, accounting for tax liabilities, and all other matters as well. This information is helpful and it can be used in order for an estimate to be made. Our experience has shown the COCR may be correct given the customer relationships, and
Objective The objectives of this report should evaluate the existing controls and make recommendations that will ensure the companies assets and help get the most accurate financial information.
Based on a system of internal checks and balances will be just in my recommendations to the president of the company, since most of the internal control systems provide for independent internal control; This principle involves the review of data prepared by employees. To get the maximum benefit from an independent internal control :
Control values and Integrity from the top make it clear that it is unethical activities will not be accepted , and set the tone for the companys culture . There are several principles of management :
1. Establishment of responsibility : management is most effective when a single source may be responsible for the problem , including the authorization and approval of transactions.
Weakness: LJB has only one accountant who serves as treasurer and controller , which can optimize the processes , but it creates an inherent risk . Cashier handled informally . Accountant is so busy that the company handles the checkout bit differently . All employees have access to the petty cash drawer and just put a note asking if they use any of the cash.
Recommendation:* Align the specific obligations of employees to limit access to authorized employees so that the buyer is not the same person who authorizes the payment without the approval of the head at least . Otherwise , a person may make payments that are made to yourself.
* Use unique passwords per employee to protect the purchasing system to provide adequate documents and records management.* Assign petty cash custodian.2 . Segregation of duties : ” After one