Memorandum: Internal Control Report

In: Business and Management

Submitted By snuffy67
Words 1353
Pages 6
Memorandum: Internal Control Report
To: President,
In order for Company to go public in the future, the Sarbanes-Oxley Act of 2002 requires that companies must maintain an adequate system of internal controls and that outside independent auditors must verify the adequacy of the internal controls. Internal controls consist of five factors. First, develop and maintain a controlled environment that makes it very clear across the organization that unethical behavior and fraud will not be tolerated. Second, set up and implement a risk assessment that identifies various business factors that could cause risk and determine how to manage the risks. Third, manage and maintain control activities that will reduce fraud occurrence by developing policies and procedures aimed to manage the risks. The fourth factor is the information and communication control that ensures all parties have access and knowledge of the appropriate information to manage the risks at all levels of the organization as well as appropriate external third parties. The fifth and final control is monitoring the internal control systems on a regular basis for adequacy. Within these controls are the principles of internals control activities that include the establishment of responsibility, segregation of duties, documentation procedures, physical controls, independent internal verifications, and human resources controls. These principles will be referenced in our review of LJB Company’s controls. Company does have some of the principles in place. The company has recently started using pre-numbered invoices. This is a great documentation procedure. This will ensure accuracy of tracking the order through the accounting department and when the payment is received to know which customer the sale belongs. Documentation procedures should be set up that anything involving an invoice, check, or cash…...

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