LBJ: SOON TO BE A PUBLIC COMPANY
A Guide To Internal Control
Table of Contents
2. Internal Control Standards
3. LBJ’s Successes
4. LBJ’s Opportunities For Improvement
This is a report for the LBJ Company to better assist with the needs of internal control. Our findings are based off of what has been shared with us by the company president on how LBJ Company operates on a day to day basis. It does seem as if there is a form of some internal control although it may be ineffective. Internal control is defined by Washington State Administrative and Accounting Manual (SAAM, 2002) as “all the policies ...view middle of the document...
Lack of internal controls and negligence have caused these changes to be necessary. Changes to privacy for clients and employees are required which was a change in the early 2000’s. When reviewing Internal Control–Integrated Framework by Committee of Sponsoring Organizations (COSO, 2013) the standards for internal controls have been set as such:
1. Demonstrates commitment to integrity and ethical values
2. Exercises oversight responsibility
3. Establishes structure, authority and responsibility
4. Demonstrates commitment to competence
5. Enforces accountability
6. Specifies suitable objectives
7. Identifies and analyzes risk
8. Assesses fraud risk
9. Identifies and analyzes significant change
10. Selects and develops control activities
11. Selects and develops general controls over technology
12. Deploys through policies and procedures
Information & Communication
13. Uses relevant information
14. Communicates internally
15. Communicates externally
16. Conducts ongoing and/or separate evaluations
17. Evaluates and communicates deficiencies
If these standards are followed they will not only keep LBJ in compliance within its own organization but also with the standards of outside auditors. Internal Control Standards such as these will help once LBJ decides to become public and will help with the growth and development of this organization. Ignoring these standards may effective the organization’s credibility and its financial standings or better yet possible investors.
LBJ Company happens to be a successful organization for the nature of business that they are in. The ability to trust in team shows that they are confident with the people they have hired to work for their organization which limits high turnover rates and throwing money into training every time they have to replace an employee. The organization is lean which also helps because they are able to reinvest the funds back into the organization for growth and development opportunities. It seems good that the accountant has the employees come pick up their checks to limit possible fraud opportunities. Due to the fact of how well you have been dealing with internal control thus far has allowed the company to be successful and establish itself. We also recognize the fact that the accountant is using numbered invoices which shows that he has assessed that there is an opportunity for risk if the pre-numbered invoices are not used. Purchasing an indelible ink machine to print checks could possibly be a good investment for the organization because it minimizes risk exposure due to the inability to alter the checks that are given out.
LBJ’S Opportunities for Improvement
After review of the organizations day to day operations we have found areas that need improvement that will help with the needs of the organization. First...