Prepared by: Tracey Maier
Table Of Contents
Introduction …………………………… 3
Findings ……….……………..…………. 4
Summary & Conclusion …………… 8
Works Cited ……………………….…… 9
I’ve had the pleasure of reviewing your company prior to going public. Often businesses fail in their Initial Public Offering (IPO) due to a few key misses in their internal controls. Your company is clearly on the way up very quickly and going public will help finance your long-term goals as an organization. In order for you to stay competitive and be successful in your IPO, a few changes need to be made in your organization to raise the level of internal control. In the first section, you will see a layout of internal controls that have been proven to strengthen other organizations. In the following section, detail will be provided about what you can capitalize on to remain strong in the industry. Maintaining a lean structure to the organization will help drive efficiency and keep costs down. Ramping up the documentation procedures will also a practice that is strongly encouraged. Finally, in Section 3 you will see some recommendations to remedy some of the problems that have resulted from a lack of certain internal controls. After reviewing the status of the organization, there is certainly room for improvement to be implemented before the IPO. This will ensure a faster start with more positive results.
Education is the key to success, especially in going public. In 2002, the Sarbanes-Oxley Act added new internal controls that held publicly traded companies to a higher standard of ethics and reporting. (Wasserman) Internal Controls
1 Establishment of Responsibility: Control is most effective when only one person is responsible for a given task. Employees should take ownership of a given activity. 2 Segregation of Duties: In related activities, ensure that more than one person is responsible for the different tasks. If a task requires purchasing, receiving, approval, and authorizing payment, make sure not just one person is responsible for all duties related. 3 Documentation Procedures: When a transaction occurs, there should be adequate documentation to provide a reference that it occurred. 4 Physical Controls: Use physical barriers to safeguard assets and increase security in records. 5 Independent Internal Verification: Companies should verify records prepared by employees and the party verifying should be independent from the party preparing record. Discrepancies should be reported. 6 Human Resource Controls: Rotate employees’ duties and require vacation be taken so an employee is deterred from performing fraud. Also, utilize background checks. (Kimmel, 2013) These principals of internal controls will be the foundation for which your business should build upon. In the next sections, I will discuss what the company is doing well and should continue to practice, along with some opportunities for growth before the initial public offering.
In your organization, there are certainly a few things that you will need to keep in order to successfully go public. Having a relatively lean organization will help your potential shareholders see the value in investing in a company who focuses on the bottom line. Revenue generation isn’t the only thing your company focuses on; there’s also attention to cutting costs, which is important.
In addition to running a lean organization, the internal controls that you do have in place are also very important to maintain. It’s critical to have establishment of responsibility, which means that your employees own their tasks. Your accountant clearly takes ownership of quite a few responsibilities. There is no “double ordering” of supplies because only one person is performing that task.
The use of pre-numbered invoices and printing checks with indelible ink will also increase...
Cited: 1. Kimmel, P. (2013). Financial accounting: Tools for business decision making. John Wiley and Sons, Inc.
2. Feldman, A. (n.d.). Retrieved from http://www.inc.com/magazine/20050901/surviving-so-sidebar.html
3. Wasserman, E. (n.d.). Retrieved from http://www.inc.com/guides/preparing-for-initial-public-offering.html
4. (n.d.). Retrieved from http://www.soxlaw.com/index.htm
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