Financial Accounting

Veronica Bradley Financial Accounting idealistic 12, 2012 Internal Controls grounds Study 2 Internal Controls LJB Comp all, a topical anesthetic distributor, has asked your method of accounting family to evaluate their transcription of inhering verifys beca example they ar mean to go domain in the future. The Company has to check the inwrought checks of a agreement of checks and balances knowing to detect and balk faker and errors. The Sarbanes-Oxley Act conducts U. S. companies to grow their remainss of internal commit got. The society hired has to detect the internal hold up system and meet the companies requirements.The internal prevail standards relevant to Sarbanes-Oxley (SOX) apply wholly to with child(p) public companies listed on U. S. exchanges. There is a continuing debate as to whether non-U. S. companies should have to agree with this extra layer of regulation. Debate about foreign companies (non-U. S. ) adopting SOX-type standards centers o n whether the benefits give-up the ghost the appeals. The concern is that the higher costs of SOX compliance atomic number 18 making the U. S. securities markets less(prenominal) competitive. These comeivities are the backb wholeness of the partys efforts to deal the risks it faces, such as fraud.The specific visualise activities used by a bon ton lead vary, depending on prudences sagaciousness of the risks faced. This assessment is heavily influenced by the size and nature of the company. The principles of internal dominate activities are (1) instauration of responsibility, (2) sequestration of duties, (3) living procedures, (4) corporal controls, (5) independent internal substantiation, and (6) piece imagination controls. hash out the professorship of what the company is doing right (they are doing just about things well) and as well suggest to the President whether or non they should buy the ineradicable ink machine.When you send word the President, pl ease be sure to reference the applicable internal control principle that applies. The things that the company is doing well are that utilise the pre- numbered invoices. When the company was non apply pre-numbering they violated the documentation procedures. If pre-numbered documents are not used, then it is around impossible to account for the documents. This go out keep neat documentation on some things for future reference to have on hand and things arent done more than one time by different people.Pre-numbering swear outs to prevent a transaction from macrocosm recorded more than once, or conversely, from not being recorded at alone. Second, the control system should require that employees straight off forward source documents for accounting entries to the accounting part. This control measure helps to secure timely recording of the transaction and contributes directly to the truth and reliability of the accounting records. With the information provided the company should invest in an ineradicable ink machine. This will put the company in more control of accounting procedures.And with this in hand will help reduce the scene of any fraud divergence on in the company with the checks being more manageable. commit of physical controls are substantial. The accountants act of keeping the checks in a safe in his office is in accordance with the physical controls principle. This reflects the safeguarding of assets and enhances the accuracy and reliability of the accounting records. The President should also know what they are doing wrong like the petty immediate payment situation. both employees have penetration to the petty immediate payment in a desk draftsperson and are asked to only place a note if they use any of the cash.The company had a hard time getting the employee to admit it was him because the company does not sequestrate soulfulness passwords. The company is violating the establishment of responsibility, and sequestration of duties, documentation procedures, independent internal tab and human resource controls. With the petty cash Internal control over a petty cash investment firm is strengthened by (1) having a supervisor make surprise counts of the lineage to confirm whether the pay petty cash improvement and store cash equal the fund amount, and (2) canceling or mutilating the paid petty cash receipts so they cannot be resubmitted for reimbursement.With the establishment of responsibility the company is violating that responsibility by not delegate responsibility to specific employees. Control is well-nigh good when only one person is responsible for a given task. Without doing this lend the door adequate to(p) for fraud and other possibilities to of things to occur. With the company hiring convicted felons and sex offenders with them having a human resources department this all would have been avoided.They wouldnt have to head ache about employees using the internet to view porn sites. When the company hires employees they should have an independent confirmation for each individual employee. This will track all the employees with their computer and write in and out of the system and all things that require a verification to proceed. An accountant is not certifiable to interview everyone for authorized positions unless it is involved with their position.The President of the company needs to do a outsized evaluation of the system of internal controls to make sure all the standards are being met for intend the future of the company. As discussed earlier in the requirements of the company in stray for them to go public in the future. They are going to have to keep all the guidelines for the principles of internal control are establishment of responsibility segregation of duties documentation procedures physical controls independent internal verification and human resource controls.Financial AccountingFinancial statements produced using FIRS were used to obtain inauguration fund. Current quarterly statements are produced using this format to maintain symmetry and clarity for investors sake. SUBS lists balance sheet items, revenue, liabilities, and share measurements. GIBBS follows FIRS rules when reporting their financial information in every month financial statements fairly and accurately. It is good to use FIRS in the accounting process for any business so that all financial are being reported fairly and accurately.SUBS records assets at their cost using cost principle. International revenue from customers that belong to various countries is introduce and reported using FIRS. SUBS combines GAP along with the FIRS so that largely impacts inventory markets, investors, corporate management, accounting standards and accounting professionals setters. Cubits financial statement includes GAP and nimble principals to accommodate US based customers and accountants.FIRS is dynamic and it helps the company produce financial statements dynami cally in a constant changing environment. The convergence of some(prenominal) these standards helped SUBS in producing financial statements with professionalism, uniformity, optimism and transparency. The major difference between GAP and FIRS comes mow to being rules- based vs Reminisces-based this poses a challenge in areas such as the income statement, consolidation, the earnings-per-share calculation, the inventory, and the costs. In consolidation, U.S. GAP prefers a risks-and-reward model where as the FIRS favors a control model. U. S. GAP shows extraordinary items as net income where as FIRS segregates. U. S. GAP provides the extract of LIFO, average cost or FIFO where as FIRS does not pull up stakes LIFO for inventory valuation. Under the FIRS the PEPS calculation does not average the individual interim period calculations, but the U. S. GAP does. Regarding developmental costs, GAP considers them as expenses while FIRS capitalizes them based on specific criteria.Both FAST and FIRS have determine short- and long-term convergence projects, including 20 reporting areas where differences have been resolved and completed. 3. pro Formal 4. Internal Controls SUBS needs internal controls to provide assurance in order to achieve forecasted financial reporting, compliance and operating objectives. These internal controls help SUBS to achieve its mission by ensuring that the policies, directions, practices and reoccurred approved and designed by management and board of directors are implemented properly and functions accordingly.It also ensures effectiveness is carry on in an ever changing dynamic environment. All of the five control components in the COCO integrated framework, Control Activities, Control Environment, Risk Assessment, Monitoring, and information & Communication are very important. SUBS implements all the five controls as an essential internal control and doesnt compromise on any one of them. Of the five, the most important two implemented as critical are control activities and control environment.Financial AccountingVeronica Bradley Financial Accounting August 12, 2012 Internal Controls Case Study 2 Internal Controls LJB Company, a local distributor, has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future. The Company has to check the internal controls of a system of checks and balances designed to detect and prevent fraud and errors. The Sarbanes-Oxley Act requires U. S. companies to enhance their systems of internal control. The company hired has to detect the internal control system and meet the companies requirements.The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to large public companies listed on U. S. exchanges. There is a continuing debate as to whether non-U. S. companies should have to comply with this extra layer of regulation. Debate about international companies (non-U. S. ) adopting SOX-type standards c enters on whether the benefits exceed the costs. The concern is that the higher costs of SOX compliance are making the U. S. securities markets less competitive. These activities are the backbone of the companys efforts to address the risks it faces, such as fraud.The specific control activities used by a company will vary, depending on managements assessment of the risks faced. This assessment is heavily influenced by the size and nature of the company. The principles of internal control activities are (1) establishment of responsibility, (2) segregation of duties, (3) documentation procedures, (4) physical controls, (5) independent internal verification, and (6) human resource controls. 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. T he things that the company is doing well are that using the pre- numbered invoices. When the company was not using pre-numbering they violated the documentation procedures. If pre-numbered documents are not used, then it is virtually impossible to account for the documents. This will keep good documentation on some things for future reference to have on hand and things arent done more than one time by different people.Pre-numbering helps to prevent a transaction from being recorded more than once, or conversely, from not being recorded at all. Second, the control system should require that employees promptly forward source documents for accounting entries to the accounting department. This control measure helps to ensure timely recording of the transaction and contributes directly to the accuracy and reliability of the accounting records. With the information provided the company should invest in an indelible ink machine. This will put the company in more control of accounting proce dures.And with this in hand will help reduce the chance of any fraud going on in the company with the checks being more manageable. Use of physical controls are essential. The accountants act of keeping the checks in a safe in his office is in accordance with the physical controls principle. This reflects the safeguarding of assets and enhances the accuracy and reliability of the accounting records. The President should also know what they are doing wrong like the petty cash situation. All employees have access to the petty cash in a desk drawer and are asked to only place a note if they use any of the cash.The company had a hard time getting the employee to admit it was him because the company does not assign individual passwords. The company is violating the establishment of responsibility, and segregation of duties, documentation procedures, independent internal verification and human resource controls. With the petty cash Internal control over a petty cash fund is strengthened b y (1) having a supervisor make surprise counts of the fund to confirm whether the paid petty cash receipts and fund cash equal the fund amount, and (2) canceling or mutilating the paid petty cash receipts so they cannot be resubmitted for reimbursement.With the establishment of responsibility the company is violating that responsibility by not assigning responsibility to specific employees. Control is most effective when only one person is responsible for a given task. Without doing this leave the door open for fraud and other possibilities to of things to occur. With the company hiring convicted felons and sex offenders with them having a human resources department this all would have been avoided.They wouldnt have to worry about employees using the internet to view porn sites. When the company hires employees they should have an independent verification for each individual employee. This will track all the employees with their computer and signing in and out of the system and all things that require a verification to proceed. An accountant is not certifiable to interview everyone for certain positions unless it is involved with their position.The President of the company needs to do a big evaluation of the system of internal controls to make sure all the standards are being met for planning the future of the company. As discussed earlier in the requirements of the company in order for them to go public in the future. They are going to have to follow all the guidelines for the principles of internal control are establishment of responsibility segregation of duties documentation procedures physical controls independent internal verification and human resource controls.