Case study 2 Devry University acct 504

Topics: Cash, Cash register, Receipt Pages: 6 (1086 words) Published: April 18, 2014
Internal control
ACCT504 Financial accounting and Managerial use, analysis

Keller Graduate school of Management

Professor : Linval Frazer

Week 5: Case study 2

Friday , April 4, 2014

Preparing LJB’s Internal Control Reporting for Public Trading

Background LJB Company , a small business local distributor who understands to go public in the future, the company should be in accordance with the law and may need to take more stringent internal control principles . At the request of the president , an independent internal evaluation of internal controls was conducted to evaluate the direction of strength and weakness.

Objective The objectives of this report should evaluate the existing controls and make recommendations that will ensure the companies assets and help get the most accurate financial information.

Based on a system of internal checks and balances will be just in my recommendations to the president of the company, since most of the internal control systems provide for independent internal control; This principle involves the review of data prepared by employees. To get the maximum benefit from an independent internal control : Control values and Integrity from the top make it clear that it is unethical activities will not be accepted , and set the tone for the company's culture . There are several principles of management :

1. Establishment of responsibility : management is most effective when a single source may be responsible for the problem , including the authorization and approval of transactions.

Weakness: LJB has only one accountant who serves as treasurer and controller , which can optimize the processes , but it creates an inherent risk . Cashier handled informally . Accountant is so busy that the company handles the checkout bit differently . All employees have access to the petty cash drawer and just put a note asking if they use any of the cash.


* Align the specific obligations of employees to limit access to authorized employees so that the buyer is not the same person who authorizes the payment without the approval of the head at least . Otherwise , a person may make payments that are made to yourself.

* Use unique passwords per employee to protect the purchasing system to provide adequate documents and records management.

* Assign petty cash custodian.

2 . Segregation of duties : " After one employee should , without duplication of effort , provide a sound basis for evaluating the work of another employee. " 2

* Strength: Accountant receives the checks and completes the monthly bank reconciliation. This force , as the bank and the company maintain independent records , which may not always agree on what may be a simple mistake of either party. To maintain maximum benefits , a worker who has no other duties associated with cash should prepare a reconciliation.

* Weakness: The same accountant all purchases of supplies and pays for these purchases per hour is a dual role . Petty cash handled all .

* Recommendation:

1. Divide the purchase task to avoid the temptation of possible abuse. Keeper of the petty cash fund makes payments , but the reviews accountant to recharge .

2 . Require the authorization of the buyer and payment of employees on vacation at different times of the year.

3 . Documentation and procedures to provide evidence that the transactions and events occurred

* Strength: Accountant recently started using pre- numbered invoices.

* Weaknesses: Unclear procedures for shipping requirements , invoices and time signatures in developing accounting documents . All employees are required only to leave a note in the box , not supply a receipt.

* Recommendation:

* Delivery document indicates well have been shipped, invoice sales means that the client has been announced. Use remittance advice (mail receipts ) , cash register tapes, and deposit slips .

* Require signature to identify the person responsible for...
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