Document prepared for President of LBJ
August 10, 2014
Dear President of LBJ,
Thank you for allowing me to be an advisor evaluating your company internal controls. Going public is a big step in the development of a corporation, and you will come under great scrutiny as to your security principles. I’ve been informed of several examples of how the business operates and I have some remarks and recommendations for you to address before you go public. Here is the objective of internal control practices:
1. To safe guard the assets of the corporation, improve the reliability of its accounting practices and records.
2. Increase the efficiency of the corporation’s operations, and ensure that it’s following laws and regulations.
This can be achieved through the following general principles:
a. Establishment of Responsibility- Setting clear expectations of your employees and making sure.
b. Segregation of Duties and Segregation of Record Keeping- Making sure that no single individual remains unchecked by others in his or her activities, and that the same people responsible for certain actions are not also solely responsible for recording those actions.
3. Documentation of Procedures- making sure that the expense reports are accurate and that original receipt is used for proof.
4. Physical Controls- In order to safeguard property against theft and vandalism.
For all the good practices that I have noticed from the company, I like having long term employees because it is a great asset and I truly recommend you for retaining such talent. Also, the use of pre-numbered checks, pre-numbered invoices, locking up unused checks, having two managers approve new hires, and completing a bank reconciliation are great practices, and you should encourage your staff to maintain this working mentality and procedures. Printing your own checks is fine as long as you use pre-numbered check stock paper to write the checks....