Accounting - Case Study 2

Case Study #2

Internal Control

If a company wants to become public, there are a few questions to consider, such as how much to value stock at, and how many shares to offer. Taking a private business public means LJB Company will have numerous internal controls to adopt in order to keep it solvent and heading into the right direction, not only for itself, but for its future stockholders as well. For starters, management needs to assert more control. LJB Company’s brass must make it clear that integrity is valued and that unethical activity will not be allowed. The hiring of a former felon might look like as if you’re re-instituting confidence back into our fellow man, but he should never had been allowed near petty cash, or other liquid materials/assets. Another method of internal control LJB needs to adopt is better control activities. Control activities are the lifeblood of a company’s abilities to pay off debts, purchase necessary goods and services, and maintain its quality of standards. Through control activities, LJB can reduce the frequency of theft and fraud, as well as implement policies and procedures to clarify and expel risks faced by the company.

My only concern for private businesses going public is that they have their core designs, procedures, structures, and regulations developed and running smoothly. In LJB’s case, they do have some policies headed in the right direction. It’s faith in their long-term employees is reassuring, provides unified strength as the backbone of its interior structure, and develops loyalty and employee retention for years to come. Purchase of an indelible ink machine is a fantastic idea to go along with the accountant’s good idea of pre-numbered invoices. These invoices will help LJB prevent transactions from being recorded more than once, or not at all. The ink machines provides for less scrutiny when analyzing printed checks due to its incapability to wash away. In this technological age, most checks can be...