Case Study 2 Internal Control
Dorothy Blue (D01650957)1. Inform the President of any new internal control requirements if the company decides to go public. Since the President has decides to go public, the company will be required to maintain an adequate system of internal control. Congress passed the Sarbanes-Oxley Act of 2002 (SOX). One of the important laws to be passed in decades, SOX forces companies to pay more attention to internal controls. SOX imposes more responsibilities on corporate executives and boards of directors to ensure that companies’ internal controls are reliable and effective. Under one part of the law, companies must develop sound principles of control over financial reporting. They must continually verify that these controls are working. In addition, independent outside auditors must attest to the level of internal control. SOX also created the Public Company Accounting Oversight Board (PCAOB), which now establishes auditing standards and regulates auditor activity. The textbook by Waygandt, Kieson, and Kimmel discusses the “Accounting Principles” (339)
2. Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the indelible ink machine. When you advise the President, please be sure to reference the applicable internal control principle that applies.
The company has been doing well by having long term employees that shows we have a great work environment. The trust put into employees will strengthen a company. They are an asset; the managers have a great balance in keeping control of the company internally. The indelible ink machine will be a great benefit to have. Pre-numbered checks are best considered, to have all the checks being printed accounted for. And Pre-numbered helps to prevent a transaction from being recorded more the once, or not being recorded at all. Paychecks should be kept in a safe box in the office for only a…