TO: LJB Company President
FROM: Andrea Johnson
DATE: February 8, 2013
SUBJECT: Internal Control
It is with great pleasure that we can provide you information and advisement on internal controls that will assist LJB Company with going public. We understand that you have communicated your concerns and expect that this report will assist you with deriving conclusions. This report will: 1. Inform you of any new internal control requirements in reference to going public. 2. Advise and make recommendations on what the company is doing right. 3. Advise and make recommendations on what the company is doing wrong.
1. Inform the President of any new internal control requirements if the company decides to go public.
The interest of the company going public will be having a successful outcome, if all the required tests are properly administered. The Sarbanes Oxley Act of 2002, requires the CEO and CFO to certify in periodic filings with the SEC the accuracy of the financial statements and the effectiveness of the company’s internal controls over financial reporting. The outside auditor is required to audit certain companies’ internal controls over financial reporting on an annual basis. There are phased-in compliance dates for these requirements for certain smaller company filers. Companies in the IPO process and newly public companies are not required to provide either a management assessment or an auditor attestation report until they file their second annual report with the SEC. While companies in the IPO process are not required to comply with these regulations, in order to prepare for these certifications and audit, it is important to establish, document and monitor compliance of internal controls as early as possible.
2. Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the indelible ink machine. When you advise...