Acct504 Case Study 2

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Accounting 504 Case Study 2

Keller Graduate School of Management
Prepared by: Purvi Patel
Prepared for: Professor Ganesh
3 Oct, 2013

To: LJB Company President
From: Purvi Patel, Accounting firm
Subject: Evaluation of LJB Company’s Internal Control Structures
Date: 3 April 2013

Hello LJB Company President:

First, I would like to thank you for hiring my accounting firm to evaluate LJB’s internal controls system. This report will inform you of any new internal control requirements required for LJB to go public, advise you of what the company is doing right, recommend that LJB purchase an indelible ink machine and advise you what areas the company can improve.

Introduction

After observation LJB’s operations, I have determined LBJ needs to make changes regarding its internal controls system. All publically traded companies operations’ must comply with the Sarbanes-Oxley Act (SOX) accounting standards. As cited in by Kimmel (2011), complying with the internal controls practices set forth by the SOX act prevents fraud, encourage efficiency and effectiveness of operations, and insure a company is in compliance with applicable laws. The internal control standards outlined by the SOX act include a control environment, risk assessment control activities, information, communication and monitoring.

NEW INTERNAL CONTROL REQUIREMENTS FOR GOING PUBLIC

Sarbanes-Oxley Act of 2002 (SOX), enacted on July 29,2002, is a United States Federal law that imposed new rules and regulations for all US public companies.

Under SOX Section 404, all publicly listed corporations are required to maintain an adequate system of internal control. Under SOX, Corporate Executives and the board of directors are personally responsible for making sure that the internal controls in place are effective and reliable. Independent auditors should also attest to the reliability of…...

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