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Lbj Company

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LBJ Company
ATTN: President of LBJ Company
Dear Sir:
Our investigation was completed on February 8th, 2013, and there are some concerns about the current internal control of the company. Our recommendations of the new internal control our based on Sarbanes Oxley Act; we believe this information will serve its purpose to fit the needs of LBJ Company.
New Internal Control Requirements:
According to the investigation, we reviewed the following areas of internal control that need to be under the Sarbanes Oxley standards: * Human Resource Control * Segregation of Duties * Establishment of Responsibilities * Physical Control * Proper Documentation Procedures * Independent Internal Verification Evaluation of Current Internal Control:
There are two areas that have positive standards in the LBJ Company: * Transaction management * Risk assessment
We reviewed some of the internal control within your company that shows a positive impact. We identified that the company uses pre-number invoices for cash to be posted by invoice number. LBJ’s risk assessment identified that there are certain risks that could have some negative effects if these risks are not managed properly. We do not recommend purchasing an indelible ink machine to print checks because it would violate segregation of responsibilities, which states “the responsibility for record-keeping for an asset should be separate from the physical custody of that asset” (p. 228).
Internal Control Revisions:
Below is a chart of revisions that must be met by Sarbanes Oxley standards:

Procedure | Weakness | Principle Violated | Recommended Change | 1. | The accountant is assigned to more than one position. | Establishment ofResponsibilities | Each employee must be assigned one role of related activities to enhance the accuracy and integrity of financial information. | 2. | The accountant is assigned to more than one task of related activities. | Segregation of Duties | Each employee must be assigned to one task of related activities. | 3. | The accountant is the only one to verify accounting information; therefore, there is not any personnel to verify financial information. | IndependentInternal Control | Each employee that’s involved in related activities must verify accounting records to personnel to enhance the accuracy and integrity of financial information. | 4. | All employees are allowed access to petty cash. | Human Resource Control | Employees that are assigned to handle cash must be bonded to reduce employee theft. | 5 | Petty cash and pay checks are not properly stored. | Physical Control | Cash and monetary instruments must always be placed in a safe box, vault, or locked drawer. Cameras and alarms must be installed where cash and monetary instruments are stored. | 6. | Company doesn’t assign IDs and passwords to employees and monitor Internet searches. | Physical Control | Company must assign an ID and password to verify each employee. Company must monitor e-mail and Internet searches to reduce illegalities. | 7. | Company did not conduct thorough background checks. | Human Resource Control | Company must conduct a thorough background check on all new employees. | 8. | The accountant interviews and approves new hires. | Establishment of Responsibilities | The President and Human Resource are only allowed to setup and conduct interviews; and approve new hires. |

Cite References
Kimmel, Weygandt, and Kieso Donald E. Finance Accounting 6th edition. New Jersey: John Wiley &Sons,Inc. 2011. Print

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