Case Study 2 – Internal Control
A review of policies and procedures for LBJ Company has been conducted, and there is a distinct lack of internal control that must be addressed in order for the company to go public. Internal control is identified as: “the process designed to ensure reliable reporting, effective and efficient operations, and compliance with laws and regulations” (Edwards, 1994). Additionally, to attract prospective investors, LBJ Company must follow the guidelines identified by the Sarbanes-Oxley Act of 2002. The act states companies that wish to be publicly traded maintain a system of internal controls (Kimmel, 2011, p.337). The first internal control should be implemented within the human resources department which is the human resources control to define the policies and procedures for hiring practice of LBJ Company. The human resource department will have the expertise to establish policies that speak directly to the proper acquisition, promotion, benefits, and termination of all future and current employees. A full background check will be conducted on each individual who are seriously vetted for a position within LBJ. This process will eliminate the embarrassment experience by the president recently. In addition to the background checks being put in place for all employees, the principle of establishing responsibility control is needed to ensure that every employee has accountability to themselves and LBJ. This will be done by introducing a computer usage agreement signed and placed in each employee file. Having this legal and binding agreement with the employees and LBJ, will state the policy of use of all computer systems within the company and the recourse if said agreement is violated and mandate that each user have a username and password to be changed every 45 days. With the usage of common access cards or username and password combination will readily identify anyone who is engaging in illegal activities on the company’s asset...
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