DeVry University Keller Graduate School of Management
Professor Ganesh Pandit
Date: 29 November 2014
1. Inform the President of any new internal control requirements if the company decides to go public. (7 points)
• The requirements for this case study the nosiness would like to go public, it would be in compliance with Sarbanes-Oxley Act Regulations and tries to reduce immoral business behavior, the business should have an internal audit to see it is doing right things.
• It should also follows the SEC, GAAP and IFRS procedures to record all transactions.
2. Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the indelible ink machine. When you advise the President, please be sure to reference the applicable internal control principle that applies. (13 points)
Here are a few things that the business is doing positively in accordance with the Sarbanes-Oxley Act and GAAP regulations:
1. President attends the interview
2. Loyalty and trust with long term employees
3. Pre-numbered invoices are used for accounting
I would suggest the business wait to purchase the indelible ink machine at this time. It can be reconsidered in the future to determine if it is a necessary item. An indelible check unit would definitely help automate the accounting department by making it more efficient, but during this transformation the practice of purchasing checks from their bank is satisfactory. They are a private, small amount of employees, salary checks are direct deposit to employees’ bank accounts and other checks for vendors, lenders and creditors are few.
3. Advise the President of what the company is doing wrong (they are definitely doing some things poorly). Please be sure to include the internal control principle that is being violated along with a recommendation for improvement. (20 points)
Here is a list of items that the President that needs to ensure are corrected:
1. Separation of duties
2. Distribution of roles
3. IT section monitors all computers and user activities (including emails)
4. Individual security and separate password for every user
5. Block restricted websites
6. Cash handled by only one person
7. All transactions (cash in particular) to be entered into the financial system/ software
8. Background checks to be performed for new hires
9. Human Resources personnel included in the new hire interviews
10. Checks secured at all