acct 504 case study 2
LBJ Company: Internal Control Evaluation
Accounting 504: Managerial Use & Analysis
Case Study 2
Written by:
8/10/13
This evaluation is being presented as an assessment of the preparedness of the LJB Company to go public at a future date. By researching current regulations regarding publicly traded firms we hope to prepare for a smooth transition into the trading market. The Sarbanes-Oxley Act of 2002 (SOX) has established the following guidelines for publicly traded corporations and require adherence for internal controls and procedures for financial reporting. Senior management and executives will be responsible for ensuring that controls are effective and reliable. Outside auditors must periodically verify the accuracy of and adherence to the internal controls. As part of the annual Exchange Act report, an internal control report will generated along with the information recorded during each fiscal year. It is recommended that the LJB Company adopt the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and remain in compliance with the SOX Act. This framework will follow six principles of internal control.
1) Establishment of Responsibility
2) Segregation of Duties
3) Documentation of Procedures
4) Physical Controls
5) Independent Internal Verification
6) Human Resource Controls Bruce Bulmer Consultations has completed its preliminary assessment of the current internal controls at LJB Company. While there are several good practices in effect there are some areas to be improved upon. Currently LJB operates with a lean staff. While this is good to keep labor expenses down, it is recommended that should the company decide to go public that higher levels of controls be instituted. The first of those controls being that clear job descriptions and duties be established ensuring accountability. The fact that the accountant is
Accounting 504: Managerial Use & Analysis
Case Study 2
Written by:
8/10/13
This evaluation is being presented as an assessment of the preparedness of the LJB Company to go public at a future date. By researching current regulations regarding publicly traded firms we hope to prepare for a smooth transition into the trading market. The Sarbanes-Oxley Act of 2002 (SOX) has established the following guidelines for publicly traded corporations and require adherence for internal controls and procedures for financial reporting. Senior management and executives will be responsible for ensuring that controls are effective and reliable. Outside auditors must periodically verify the accuracy of and adherence to the internal controls. As part of the annual Exchange Act report, an internal control report will generated along with the information recorded during each fiscal year. It is recommended that the LJB Company adopt the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and remain in compliance with the SOX Act. This framework will follow six principles of internal control.
1) Establishment of Responsibility
2) Segregation of Duties
3) Documentation of Procedures
4) Physical Controls
5) Independent Internal Verification
6) Human Resource Controls Bruce Bulmer Consultations has completed its preliminary assessment of the current internal controls at LJB Company. While there are several good practices in effect there are some areas to be improved upon. Currently LJB operates with a lean staff. While this is good to keep labor expenses down, it is recommended that should the company decide to go public that higher levels of controls be instituted. The first of those controls being that clear job descriptions and duties be established ensuring accountability. The fact that the accountant is