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Internal Control

In: Business and Management

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Memo
To: John Clarks; President of LJB Company
From: Certified Public Accountant
Date: 1/22/2012
Re: LJB Internal Control Analysis
Dear John,
In regards of your company going public, you must be informed that under the Sarbanes Oxley Act all publicly traded U.S. corporations are required to maintain an adequate system of internal control. These internal controls are reliable and effective and if your company fails to comply, it will be a subject to fines, and company officers can be imprisoned.
There are five primary components of internal control which must be applied when going public:
• A control environment. This will be the responsibility of top management including your effort to make it clear that the organization values integrity and that unethical activity will not be tolerated.
• Risk assessment. Your company must identify and analyze the various factors that create risk for the business and must determine how to manage these risks.
• Control activities. This activity helps in reducing the occurrence of fraud and your management team must design policies and procedures to address the specific risks faced by the company.
• Information and communication. The internal control system must capture and communicate all pertinent information both down and up the organization, as well as communicate information to appropriate external parties.
• Monitoring. Internal control systems must be monitored periodically for their adequacy. Significant deficiencies need to be reported to top management or the board of directors.
And also, upon your request, I have attached my analysis of your company’s internal control system which describes the current system with its strengths and weaknesses.
LJB Weaknesses:
As I understood previously from the information provided to my colleague, there are some defects in your internal system where it might cause some...

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