Act case study
Senior management and executives will be responsible for ensuring that controls are effective and reliable. Outside auditors must periodically verify the accuracy of and adherence to the internal controls. As part of the annual Exchange Act report, an internal control report will generated along with the information recorded during each fiscal year. It is recommended that the LLC Company adopt the framework set forth by the Committee of Sponsoring Organizations of the Tramway Commission (COOS) and main in compliance with the SOX Act.
This framework will follow six principles of internal control.
1) Establishment of Responsibility 2) Segregation of Duties 3) Documentation to Procedures 4) Physical Controls 5) Independent Internal Verification 5) Human Resource Controls Bruce Bubble Consultations has completed its preliminary assessment of the current internal controls at LLC Company. While there are several good practices in effect there are some areas to be improved upon. Currently LLC operates with a lean staff.
While this is good to keep labor expenses down, it is recommended that should the company decide to go public that higher levels of controls be instituted. Ere first of those controls being that clear Job descriptions and duties be established ensuring accountability.
The fact that the accountant is practicing physical control by locking pay checks into the safe at days end. A more secure method would be to require employees to receive their pay through direct deposit.
My firm is in agreement with the LLC accountant’s recommendation to purchase an indelible ink aching. The machine will offer LLC increased security against check fraud and improve physical control when disbursing checks. We also feel that it would be a DOD idea to switch to pre-numbered invoices. To further the practice of dividing duties to improve accountability we recommend two more changes.
The accuracy of the accounting process is very important. One individual should not be responsible for the entire process. Duties should be divided in the accounting process.
We Mould like to encourage LLC to either hire a full time HER employee or choose a HER firm o manage the hiring of new employees. Simple background checks can help reduce the risk of further incidents such as the one described in the notes. In-building security need to be improved.
The current management of petty cash does not allow for the monitoring of proper fund use. The current computer system does not offer any security. The development of computer security protocols including the assigning of user names and passwords for employees to gain computer and internet access as
Nell as the construction of a firewall to restrict unauthorized material from disrupting company business. LLC Company has several good practices in place but does need improvement before going public. The most important changes will be to ensure they meet all requirements regulated by law. Although there will be some increases to expenses in implement the suggested changes.
LLC will find they are in stronger position to correct errors, detect losses and ultimately save the company money in the long run.