Internal Control Case Study #2
Acct 504 Accounting and Finance Managerial Use
Table Of Contents
1. New Internal Control requirements if company goes public (pg. 2)
2. Suggest what company is doing correct and why ink machine should not be purchased. Pg. 3
3. Internal control principle used
4. What are the wrong internal control methods being used and Principle that is being violated and recommendations on how to improve
Good afternoon Mr. president.
• Information and communication. The internal control system must capture and communicate all pertinent information both down and up the organization, as well as communicate information to appropriate external parties.
• Monitoring. Internal control systems must be monitored periodically for their adequacy. Significant deficiencies need to be reported to top management and/or the board of directors.
These regulations would need to be followed if you are to take your company public to increase investor confidence in the company. (2)
Now I want to advise that you are currently doing some of these already. What are already implemented in the company are pre-numbered documents. It’s good to have this as it will account for purchases and avoid purchases not being recorded at all. Also the documented receipts should be reported to the accounting department to ensure timely accurate reporting. With this being said, I believe the ink machine is not needed as you already have a working system in place. This principle is called Documentation procedures. (3)
While I was able to determine what was working already, where we can improve is the area of the accountant. The fact that the accountant has two essential job duties can lead to loss and risks, as he is the controller and the treasurer. He is in control of all purchases of the supplies and also pays for...