Financial Accounting

Veronica Bradley fiscal Accounting expansive 12, 2012 Internal watchs Case Study 2 Internal Controls LJB society, a local distributor, has asked your write up firm to assess their system of internecine hold backs because they ar readiness to go public in the future. The Company has to check the inner(a) instructions of a system of checks and balances designed to detect and prevent fraud and errors. The Sarbanes-Oxley Act requires U. S. companies to levy their systems of inner control. The c all tolder-up hired has to detect the national control system and meet the companies requirements.The internal control standards applicable to Sarbanes-Oxley (SOX) beget got only to large public companies listed on U. S. exchanges. There is a continuing turn 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 centers on whether the benefits buy the farm the c osts. The concern is that the higher(prenominal) costs of SOX compliance argon making the U. S. securities markets less competitive. These activities are the backbone of the communitys efforts to destination the risks it faces, such as fraud.The ad hoc control activities used by a keep company result vary, depending on managements assessment of the risks faced. This assessment is heavily influenced by the size and reputation of the company. The principles of internal control activities are (1) establishment of duty, (2) segregation of duties, (3) documentation procedures, (4) physical controls, (5) independent internal verification, and (6) tender vision controls. give nonice the hot seat of what the company is doing right (they are doing some things well) and also recommend to the president whether or non they should buy the indelible ink machine.When you advise the President, please be sure to honorable mention the applicable internal control principle that applies . The things that the company is doing well are that development the pre- numbered invoices. When the company was not using pre-numbering they profaned the documentation procedures. If pre-numbered documents are not used, then it is virtually impossible to account for the documents. This leave alone keep dandy documentation on some things for future reference to have on touch and things arent through with(p) more than one time by different people.Pre-numbering helps to prevent a exploit from beingness preserve more than once, or conversely, from not being recorded at all. Second, the control system should require that employees readily forward source documents for account statement entries to the accounting department. This control measure helps to ensure well timed(p) recording of the exploit and contributes directly to the accuracy and dependability of the accounting records. With the information provided the company should invest in an indelible ink machine. This pr ovide put the company in more control of accounting procedures.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 holding 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 tiny bullion situation. each(prenominal) employees have bother to the lower-ranking cash in a desk drawer and are asked to only mall a seam if they use any of the cash.The company had a hard time getting the employee to postulate 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 forgivin g resource controls. With the petty cash Internal control over a petty cash farm animal is strengthened by (1) having a supervisor make surprise counts of the fund to maintain whether the pay 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 delegate responsibility to specific employees. Control is most effective when only one mortal 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 awaken offenders with them having a human being resources department this all would have been avoided.They wouldnt have to worry about employees using the internet to come across porn sites. When the company hires employees they should have an independent verification f or 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 foreveryone for certain positions unless it is involved with their position.The President of the company take 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.Financial AccountingFinancial statements produced using FIRS were used to obtain startup fund. Current quarterly statements are produced using this format to maintai n consistency and clarity for investors sake. SUBS lists balance sheet items, revenue, liabilities, and share measurements. GIBBS follows FIRS rules when reporting their monetary data in every month financial statements moderately and accurately. It is good to use FIRS in the accounting process for any business so that all financial are being account fairly and accurately.SUBS records assets at their cost using cost principle. International revenue from customers that belong to various countries is tracked and reported using FIRS. SUBS combines GAP along with the FIRS so that largely impacts stock markets, investors, corporate management, accounting standards and accounting professionals setters. Cubits financial statement includes GAP and FAST principals to accommodate US based customers and accountants.FIRS is dynamic and it helps the company produce financial statements dynamically in a constant changing environment. The convergence of both these standards helped SUBS in produ cing financial statements with professionalism, uniformity, optimism and transparency. The study difference between GAP and FIRS comes down 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 whimsical items as net income where as FIRS segregates. U. S. GAP provides the option of LIFO, average cost or FIFO where as FIRS does not allow LIFO for inventory valuation. Under the FIRS the PEPS calculation does not average the individual stave 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 identified short- and long-term convergence projects, including 20 reporting areas where differences have been resol ved and completed. 3. master 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 sustained 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, 2 012 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 centers on whether the benefits exceed the costs. The concern is that the higher costs of SOX compliance are making the U. S. se curities 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. The things that the company is doing well are that using the pre- numbered invoices. When the company was not using pre-numberin g 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 procedures.And with this in hand will help reduce the chance of any fraud going on in the company with the checks being more managea ble. 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 by (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 unl ess 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.