LJB INTERNAL CONTROL REQUIRMENTS
First of all we would like to take the time out to say thank you for giving us the opportunity to serve you and your company. Our goal is ensure your company has all vital information before public access. Please see enclosed rules and regulations need to assist with your company’s migration towards public view.
Requirements for Internal Control are the company has to fill out and annual report on Internal Control over its financial reporting: * Statement of Responsibility by Company Management (the CEO and CFO) for establishing and maintaining an adequate internal control structure and procedures for financial reporting. * Statement identifying the framework used by management to evaluate the effectiveness of the Company's internal control over financial reporting * Management's Assessment of the effectiveness of Internal Controls over financial reporting * Attestation by the company's external auditor on Management's assessment of the effectiveness of the company's internal controls and procedures for financial reporting.
After reviewing the information provided, If LJB decides to go public then new internal control requirements should be evaluated such as, a control environment, risk assessment, control activities, information and communication and monitoring. This consists of all the related methods and measures adopted within an organization to safeguard it assets, enhance the reliability of it accounting records and increase efficiency of operations which ensure compliance with laws and regulations.
Mr. President, in my review seems your company is doing very well with different activities such as keeping the checks secure in a safe for security measures. This also helps protect the company funds and prevent theft from occurring. Another good activity I see is the start of pre-number invoices which help keep track of inventory. In pre-numbering it helps to prevent a transaction from being recorded more than once, or not being recorded at all, which is part of the internal control of independent internal verification. I would also strongly recommend that you purchase the indelible ink machine to print checks. This machine helps is part of the internal control procedure of using physical control. This machine eliminates fraudulent activities. I have also noticed that your company is not in compliance with the internal control in various areas. In order to establish responsibility you must assign duties to specific employees. Control is most effective when only one person is responsible for a given project. Having one accountant to serve as Treasurer and Controller violates the segregation of duties. Different individuals should be responsible for related activities, therefore, I recommend that you split the duties of the accountant and this will help various type of fraud from occurring. I see where all employees have access to the petty cash which violates the establishment of responsibilities of internal control. I recommend that you have one person over the petty cash and have a supervisor make surprise counts of the fund to confirm whether the paid petty cash receipts and fund cash equal the fund amount. This will help prevent theft of funds. On payday, the checks are picked up by the accountant and left in his office for pickup this violates physical control of cash disbursement. I recommend that you have the secretary hand out the check and have them sign