Ljb Company

| LJB Company |

Memo

To: LJB Company

From:

CC:

Date: [ 2/12/2012 ]

Re: Internal Control

Impact of going public.

Going public can offer several advantages such as in influx of cash that can be used for expansion or paying off existing debt. This can also increase the public awareness of your company. There however, will be some additional changes that will need to be made such as additional disclosures for investors. Public companies are regulated by the Securities Exchange Act of 1934 in regards to periodic financial reporting. You will also have to meet rules and regulations that will be monitored by the Securities and Exchange Commission (SEC) ( Investopedia ULC, 2011).

There is also the passing of Sarbanes Oxley Act of 2002, where companies are required to document their controls, test the documented controls and have their external auditors test their testing of controls and write a report about the effectiveness of controls surrounding financial reporting. So, there will be additional work on designing, testing and auditing of controls if you decide to go public (John Wiley & Sons, Inc., 2009). Because of the added rules and regulations there will be additional cost in complying with the requirements ( Investopedia ULC, 2011).

Good practices.

Having long term employees is a real asset and the retaining of talent helps lower the cost of training new employees. The use of pre-numbered checks, pre-numbered invoices, locking up unused checks, having two managers approve new hires, and completing bank reconciliation are "best practices" and I recommend that you to stick with these procedures.

Weak practices and recommendations.

There are a number of practices, however, that make you vulnerable to errors, both intentional (fraud) and unintentional (mistakes).

Segregation of duties: This is critical to effective internal control as it will reduce the risk of mistakes and inappropriate actions. Furthermore, it will help to fight fraud by...