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Internal Control Case Study. Some of the important independent components of internal control system which an organization should have are:

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Internal Control Case Study The content of this report is based on the methods adopted by an organization to preserve its assets, increase its operation efficiency and enhance reliability of accounting records and also to ensure that the organization is in accordance with the laws and regulations of that country. In other words assuring high standard of business & ethical practices permeate those activities which surround the organisation and optimally utilising its resources. Some of the important independent components of internal control system which an organization should have are: * Control operating environment * Risk assessment * Control Activities * Information systems & communication methods * Monitor performance In LJB case we can clearly see that the organization do not have an effective internal control system. If the company is thinking to go to public in near future it has to formulate a proper internal control system. The first and the most important component of an internal control system in an organization is leadership which comes in the control operating environment. ...read more.


LJB is violating the principle of segregation. The accountant who works as a controller and treasurer doing the company's maximum work right from purchasing, making payments doing bank reconciliation, recruiting etc. when one persons manages so many things the probability of making an error increases. Also, there can be various frauds and one may not be aware what went wrong. The three principles of internal control segregation are missing and we suggest that the company should implement these principles documentation, independent internal verification and recordkeeping from physical notebook. This will deliver a proper effective system of internal controls. Any attempt, error or fraudulent activity will be detected easily. Some of the Internal controls for cash receipts the company should include are: 1) Only one person should handle the cash may be appointing a cashier who maintains all the records and should be responsible for any error. 2) A proper recording of all the remittance advices, bank deposits etc. 3) Daily counts of receipts and daily comparisons of total receipts with total deposits Some of the internal controls for cash disbursement the company should include are: 1) ...read more.


An important principle of internal control is to give responsibility to specific trust worthy employees. Only One person should be given to control petty cash and keeping a log of it. At the end of the week or day the supervisor can reconcile it. A proper recording of inflows and outflows has to maintain by that employee. Human resource control activity also plays a vital role in internal control system. In the case we can see that the company has not done a background check for its employee before recruiting them. Through background check the company is not risking the company's security as well as information. A hired employee should be give a computer and a separate login id and password. This will help the company to track the employee's login timing and track their activities individually. The company should also have a strong web control policy which restricts them to visit inappropriate sites from work place; all these will help the company to formulate a proper human resource control and internal control of the firm. The company should include all the above mentioned point in order to have a sound internal control before they goes to public. ...read more.

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