LBI Example 2 Article


LJB Company is known as a distributor business that will be going public soon. LJB asked my accounting firm to judge their inside control procedures that are at the moment in place and what changes need to be carried out if needed. " The principal way that fraud, along with unintentional mistakes, is averted, detected, or perhaps corrected within an organization can be through a correct system of internal control. ” (Thomas, Watts. 2013) Following reviewing the data that my personal partner offers shared with me personally, I noticed there are some inside control issues that need to be resolved with the LJB president and some suggestions upon changes to a few poor habits that can produce their business successful and safe. Internal regulates are so critical that U. S Congress passed a law to require open public companies-to keep a system of internal controls and to require that their particular auditors take a look at those handles and concern audit reports as to all their reliability. (Thomas, W. 2013) Some of the problems that will be dealt with are the excessive use of their curator. The accountant has many jobs than the most crucial one, which is to be their accountant. The petty money needs to have something in place than simply all staff having access to the fund. As well as a system to get the employees to post their paychecks needs to be in place for security purposes. The president needs to have a person whose job is to perform background checks about all new hires and an insurance policy in place to get reasons of firing a staff. Lastly, will research to get the president of LJB to see if it might be beneficial for the corporation to purchase a great indelible ink machine. Inner Controls Suggested

First target is the scrivener. In the analyze, the scrivener has a large amount of job obligations to fulfill. Dr. murphy is the treasurer and controller, selection interviews and employs new workers, and grips the paychecks when its payday. Beneath the internal method of " Smart employing practices and separation of duties”, the accountant ought not to be handling cash due to the fact that they can steal money and hide the theft in the accounting records. This kind of coincides while using bank getting back together duties as well. " The lender reconciliation points out all distinctions between your money records and your bank harmony. The person who prepares the lender reconciliation should have no other cash duties. Or else, he or she can steal cash and manipulate the reconciliation to conceal the theft. ” (Thomas, Watts. 2013) Recommendation would be to include a separate person do the bank reconciliations or bring the company up to speed and use on the web banking exactly where it would enable LJB to pay bills and view their very own account electronically at anytime rather than waiting before the end with the month intended for the bank statement.

It is hard enough to stay on top in the books but to also be the controller who will be someone who is liable for customer choices and accounts receivable. A suggestion is to include " one third employee (perhaps the person in the controller's office who reconciles the bank statement) should review the treasurer department's daily records of money deposited with totals of collections posted to individual customer accounts by the accounting department. ” (Thomas, Watts. 2013)

Under the " Intelligent hiring methods and separating of duties” there should be a person inside the human resource section or in the event no department exist; then the member of management should be the person interviewing and hiring brand new employees. In the interviewing process there needs be plans and types of procedures to follow including background checks and formal teaching. Each new employee ought to understand what all their specific tasks are given for instance a job explanation as to not terme conseille into various other job duties that can cause internal control misuse. Making use of the " control environment”, staff will have a code of ethics that is enforced by company to adhere to. " A vital ingredient inside the control environment of many companies is a corporate code of ethics, patterned by best management, which in turn...

Cited: Walter T. Harrison; Charles T. Horngren; C. William (Bill) Thomas. Economical Accounting, VitalSource for DeVry University. ninth Edition. Pearson Learning Alternatives, 2013. VitalBook file. Bookshelf.