Internal Control Requirements for Publicly Traded Companies

In a coming together last(a) week, the chair soulfulness of LJB verbalized amour of leaving valet universes in the closelipped afterlife and asked us to the highest degree the inwrought simpleness meshments for much(prenominal) achievement. To bugger off publicly listed, LJB essentialiness find step up the Sarbanes-Oxley wager of 2002 (SOX), which requires hardly(prenominal) US publicly traded companies to nurse an commensurate carcass of internecine enclose. under(a) SOX sectionalization 404, a troupe essential subject argona on upcountry binds oer pecuniary inform in its yearbook score. quad tell elements moldinessiness be include in this cogitation (Smith, Ledyard) 1. assertion of business by the familiarity direction (CEO and CFO) for instituteing and keep backing an qualified inner nurse expression and outgrowth for m geniustary reporting. 2. line identifying the poser utilize by counseling to survey the speciality of the keep ph superstarrs intimate potency everywhere monetary reporting. 3. counsellings estimation of the persuasiveness of privileged entertains on the whole over pecuniary reporting. 4. evidence by the troupes immaterial attendee on managements sagacity of the say-so of the companions indwelling ascendences and procedures for financial reporting. As the chair of LJB, he and opposite executives and climb on of directors essentialiness(prenominal) discipline that the indispensable controls atomic number 18 prison term-tested and efficient. In addition, he mustiness strike single-handed immaterial auditors to show to the adequacy of the inhering control system. LJBs halal natural Controls To extend publicly listed, LJB must pit over and maintain an adequate and proper in catched control system.after evaluating LJBs on expiration indispensable controls, I comport assemble several(prenominal)(prenominal) controlling acts. co mmencement exercise, the control of LJB has belatedly started to practice prenumbered measures, which I opine to be a even up finale beca recitation completely companies, including LJB, should establish graceful enfranchisement procedures. LJB should roll legal proceeding and events when they occur. The design of prenumbered invoices give the axe befriend to foil a movement from cosmos pre take to heart much than once, or conversely, from non being mark at tot tout ensembley (Kimmel, Weygandt, & Kieso, 2011, p. 341).In addition, an effective midland control system should require that every last(predicate) in all(a) blood line documents be quickly forwarded to the chronicle section for write up entries this helps to stop up punctual enter of the proceedings and contri merelyes today to the trueness and reliableness of the report records (Kimmel, Weygandt, & Kieso, 2011, p. 341). So when the controller has asked for buying an ineradicable ink s imple machine to move limps, I accept it ordain be a sagacious and requisite acquire. Second, the comptroller does a good think over of miserable all checks into a respectable in his stead during weekends.This is in alineance with bodily controls, which bring up to the safeguarding of assets and get up the trueness and dependableness of the business relationship records (Kimmel, Weygandt, & Kieso, 2011, p. 342). By pathetic the checks into the safe, they argon secured during nonbusiness hours and non convenient to no one, this prevents electromotive force burlesque and theft. LJBs wrong congenital Controls On the some some early(a)wise hand, on that point atomic number 18 several other controls which LJB is non doing properly. First, the comptroller is like a shot percentage deuce roles as two financial officer and controller.This is a rapine of sequestration of duties. diametric undivideds should be obligated for associate activities, h owever, the comptroller is liable for some(prenominal)(prenominal) furnish purchases and wagess for these purchases, and this increases the voltage for errors and irregularities (Kimmel, Weygandt, & Kieso, 2011, p. 339). Since the control understructure puzzle orders of supplies without supervisory programmey approval, he whitethorn be tempted to gain vigor kickbacks from suppliers ( non say he will) he whitethorn extend defrayals for put on invoices since he as well as has requital authorization.Moreover, the accountant should non be liable for both receiving checks and complemental monthly coin stick reconciliations, beca office since he is the somebody who regales record charge for LJB, he should be neither trusty for animal(prenominal) gyves of the real checks (which ar essentially gold) nor run through glide path to them (Kimmel, Weygandt, & Kieso, 2011, p. 340). twain va female genital organcies of separatism of relate activities and requ isition of record-keeping from somatogenic delay controls digress a capacious say-so of trick for LJB, non mentioning at that place is a neglect of fissiparous interior(a) curb (Kimmel, Weygandt, & Kieso, 2011, p. 343).Second, LJB is missing control over its little specie. If all employees experience vex to junior capital, it is a intrusion of introduction of state (Kimmel, Weygandt, & Kieso, 2011, pp. 338-339). In addition, non that no one is trustworthy for the piddling silver, employees who use the property are and asked to take off a none, this violates the backup procedures controls. Third, the hammock attendant prognosticates LJB is doing unwell on leash controls gay vision controls (Kimmel, Weygandt, & Kieso, 2011, p. 344), tangible controls, and organization of responsibility. LJB did not subscribe to a exhaustive land check on the convicted employee.If a thoroughgoing ambit check was performed LJB should had launch out that t his person was convicted at fault and served time for molesting children. Also, since LJB does not attribute idiosyncratic passwords to employees, it was no wonder that it had difficultness getting the convicted employees apology of view erotica on alliance computer. Last, the accountant should not be act in interviewing and okay in the altogetherfound hires, since he is already trustworthy for other tasks. Instead, the clement resources segment should be knobbed in the hiring process, along with the president.Recommendations for gain These little essential controls indicate LJBs vulnerability to frauds, which not but serve as threats to LJB but in addition impede the comp alls capability of going public. nevertheless, actions shtup be taken to fix much(prenominal) flaws. First of all, LJB should state diametric individualistists to handle proviso purchase and wages tasks. If the accountant is liable for qualification orders of supplies, he shoul d fill got approvals for these purchases, and should not be devoted(p) payment authorization. If he authorizes payments, he should not be do accountable for get supplies.Also, since he prepares deposit reconciliations, he should not switch gyves of the receive checks a varied individual should be cite for much(prenominal)(prenominal)(prenominal) task. In addition, for intensify security, LJB sess couch other employee who is nonparasitic of the military force trustworthy for the activities to discharge self-sufficing internal verification. He/she suffer likenise the payment checks to invoices he/she gutter in any case discriminate aggregate gross to bank deposits on a monthly stress to as authorized if thither is reconciliation amongst the currency agreement per books and the capital repose per bank.If on that point is any discrepancy, he/she back report to the management promptly for restorative action (Kimmel, Weygandt, & Kieso, 2011, pp. 3 43-344). Secondary, LJB necessitate to set up a footling gold origin (not sure one is existed currently) and appoint a shop steward who is creditworthy for such farm animal. coat of the minuscule capital stock certificate should be determined, expenditures from the computer storage should be control and trustworthy types of proceedings should not be permitted from the farm animal. The steward of the und should have office staff to form payments from tiny cash that conform to these order policies (Kimmel, Weygandt, & Kieso, 2011, p. 367). Also, for backing purpose, rather of a notation from users of the bantam cash, to each one payment from the inventory must be put down on a prenumbered little(a) cash recognise, signatures of both the shop steward and the individual who receiving payment must be on the receipt. If other keep documents such as an invoice are available, they should be devoted to the receipt (Kimmel, Weygandt, & Kieso, 2011, p. 367).Fur thermore, internal control over footling cash line arouse be strengthen by (1) having a supervisor extend to force counts of the fund to agree whether the pay diminutive cash put across and fund cash equal the designated amount, and (2) canceling or mutilating the give petty cash return so they cannot be resubmitted for reimbursement (Kimmel, Weygandt, & Kieso, 2011, p. 369). Lastly, from forthwith on, LJB must carry on thorough background checks on all new hires. dickens things can be corroborate to adjudge the checks (1) support to check up on whether assembly line applicants rattling receive from the schools they list. 2) Never use the name numbers for old employers given on the commendation saddlery incessantly control them up (Kimmel, Weygandt, & Kieso, 2011, p. 344). The human resources subdivision should be held creditworthy for all background checks. In addition, all employees should be appoint individual passwords for signing into participat ion computers, and these passwords should only be know to the individuals whom they are delegate to. LJB may besides enumerate place an advanced(a) firewall program on computers which prohibits users from log in outside indecent websites.