Internal Control

Accounting and Finance

Internal control is a process that is designed to assure a company is effective, efficient and reliable when it comes to financial reporting and compliance with laws and regulations. These controls are to make sure that no one employee has too much control. Fraud occurs when a person has motivation, opportunity and personal characteristics that make the risk of fraud likely. Internal controls limit the opportunity of fraud when implemented properly. (Internal controls, 2003-2012)

1. If the company decides to go public then the company needs to abide by the Sarbanes Oxley Act of 2002. This act requires documentation of controls and external auditors to test the controls in place. Moreover the act requires a written report of the effectiveness of these controls.

Section 302: A mandate that requires senior management to certify the accuracy of the reported financial statement.

Section 404: A requirement that management and auditors establish internal controls and reporting methods on the adequacy of those controls. Section 404 had very costly implications for publicly traded companies as it is expensive to establish and maintain the required internal controls. (Sarbanes-Oxley Act of 2002, 2012)

2. I believe the company has been doing great by having long term employees around that they can trust, this will usually mean that the work environment is one where employees like to work in. It also has been doing well because if the company trusts its employees then this will strengthen the organization. In the case of the indelible ink machine, I think this would be a good machine to have to help with the job. In the other hand my opinion regarding the paychecks would be that only the manager or the person in charge of payroll should have access to the these checks otherwise they should be locked in the safe at all times. Also, petty cash should not be easily accessible for anyone since money could go missing and then...