Internal Control

Case Study 2- Internal Control

As with any major business, the transformation of going from a private to public requires some extensive planning and preparation. With that being said, if LJB decides to go public in the near future, there are currently no new internal control requirements to be aware of. Outside of the fact that there are no new requirements, there are still quite few things that the company should have in place before the company going public.

LJB is a relatively small company in terms of employees, which puts you at an advantage. Not only does it show the faith you have in your long-term employees, but it also develops loyalty and employee retention. With a smaller organization it will be easier to set new expectations and implement new rules throughout the organization. Another thing that is an asset to your company is your accountant, who also serves as the Treasurer and Controller. He is responsible for so many duties that are important to the operating activities of the company; everything from purchasing supplies, to paying for the supplies, receiving checks, and even the monthly bank reconciliation. The accountant's recent decision to switch to pre-numbered invoices was a great idea, and the purchase of an indelible ink machine will be an excellent investment. It will help organize as well as simplify the accounting duties. Due to the fact that there is so much responsibility being placed on the accountant, there are some other areas of the company that are suffering from lack of rules and/or guidelines.

One area that is lack attention is the handling of petty cash. After observation, it seems as though there is no real procedure. There are no restrictions on who has access to petty cash nor is there proper documentation being done when money is taken out. Another area of concern is that there is no way to monitor what is happening on company computers and on company time. There should be account assigned to every employee, where they would have to create a login and password to access the system. This creates a tracking system, where you could catch anything happening illegal or unethical within the company. The last recommendation would be to do background checks on all potential new hires. You don't want to hire anyone who could potentially harm or put your company in jeopardy.

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