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Case Study 2

With deciding to go public; LJB Company would be required to follow the Sarbanes-Oxley Act; which stated that all public traded U. S. corporations are required to maintain an adequate system of internal control. As the President of the company it will be both your responsibility of the board of directors to make sure that the internal controls are reliable and effective. You must also hire an independent outside auditor to come in periodically to ensure the adequacy of the company’s internal control system. TO ensure that you will be set up to meet all the internal control requirements by the time LJB goes public, this report will list the requirements of internal control and state what your company is currently doing correct and that can help the company meet the internal control standards.
Internal control is defines as all the related methods and measures adopted with an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations. It has five primary components, a control environment, risk assessment, control activities, information and communication, and monitoring.
These components are broken down further into six principles. These principles are establishment of responsibilities, segregation of duties, documentation procedures, physical controls, independent internal verification and human resource controls. By following the guidelines of these principles; you can ensure that your company is not only meeting regulations but will also ensure that it is being run efficiently with minimum fraud. Using these guidelines, we’ll now discuss the problems with LJB Company and the changes that can be implemented to make the company’s internal control more efficient.
The first issue that LJB needs to address is the fact that the accountant

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