Task: You have a client, LBJ Company, with a lean organization and these practices:
- Accountant purchases all of the supplies and pays for these purchases.
- Accountant receives the checks and completes the monthly bank reconciliation.
- All employees have access to petty cash and are asked to only place a note if they use any of the cash.
- Accountant picks up paychecks and they are left in his office for pick-up. Before he leaves for the weekend, he will move the checks into a safe in his office.
- Accountant has recently started using pre-numbered invoices.
- The president is considering buying an indelible ink machine to print their checks.
- The president expressed his frustration about a recent hire who was a felon because both he and the accountant both interview and approve all of the new hires.
- Explain the impact on internal controls if a company decides to "go public."
- What is the company doing right? Should they buy the indelible ink machine?
- What is the company is doing wrong? Make recommendations for improvement.
- Be sure to reference the applicable internal-control principles.