Segregation of Duties Memo - Internal Controls and Your Company

Memo

To: The President of LJB

From: D. Newton

CC: Investors /Employees

Date: 4/1/2012

Re: Internal Controls

Internal Controls and your Company

When a company is considering going public, the company would have to adhere to the many sanctions and requirements of the Sarbanes Oxley Act of 2002. The SOX requires the documentation of controls and external auditors to test controls and reports on the effectiveness of these controls. The SOX requires that the annual reports of public corporations include reports by management as well as the external auditors, certifying the adequacy and effectiveness of the company's internal controls. Internal control is defined as a process affected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. The company should hire more employees so that there would be a better segregation of duties and no one has dual roles such as Controller and Treasurer. Also, the company should implement assigned passwords to all employees. Access to petty cash should be limited to one employee who controls and monitors the in-flows and out-flows of cash.

Mr. President, it is very honorable and respectable of the company to recognize and reward long term employees for their hard work and dedication. Employee appreciation is very important for the company because it shows the employee that the company values the relationship and in turns gives the employee a sense of loyalty when employed there. Also, there are some great physical controls in effect that secures the company's payroll checks from being stolen/lost. Pre-numbered invoices for transactions are mandatory to have in place. SOX requires mechanical and electronic controls to safeguard assets and enhance the accuracy and reliability of the accounting records. I believe that the idea of purchasing an indelible ink machine would be beneficial to have with the company in order to help the managers control the printing and writing of checks. Pre-numbered checks are easier to manage especially when the company writes hundreds of checks each month and it's more professional for the company to be able to track checks that have been cleared, lost, or stolen. Documents should be pre-numbered because this provides evidence that transactions and events have occurred.

The process of hiring employees should go more in debt. The new employees should be screened and background checks would be required along with a drug-test. Due to the recent incident with viewing unauthorized content on company computers, each employee should be assigned an individual user name and password. With