The Sarbanes Oxley Act - Essay Example

LBJ Company is doing some things well. The controller is a valuable asset to the business. The company uses multiple processes that are needed to have good internal controls such as bank reconciliations and asking for a written explanation if an employee uses the petty cash account. The petty cash process can be improved by asking the employees for a receipt of the purchase. Further recommendations to the petty cash process will be mentioned in the next paragraph. In terms of fostering a good corporate culture, the managerial staff is showing loyalty, empowerment, and a belief in the employees.

There are many internal control issues at LBJ Company. First, the accounting department is understaffed, which has the controller serving too many functions. This creates internal control deficiencies in the entire system. The controller should not be making purchases, receiving checks, or making bank deposits. Nobody is overseeing the work performed by the controller.I recommend the company hire two additional accountants for the department. The company also needs to raise the level of accountability and to verify the work of the department.

This can be done by implementing two company audits twice a year to be performed by an independent auditor with CPA credentials. Petty cash handling is a mess. A person needs to have control over the money. Any employees that need petty cash would ask that person for the money and then provide a receipt to that person after the purchase is made. Furthermore, the company needs better internal controls for human resources and information systems. The background check of new hires must improve. A certificate of good conduct must be a requirement prior to hiring a new employee.

The information system's internal controls can be improved by assigning each employee username and password to enter the company’s computer system.