Based on the information which was relayed to me I wanted to formally address your concerns with internal control and acceptable usage guidelines at LBC company. As I am sure you are well aware, your intension on taking the company public will demand very tight internal controls and the highest standards for your employees. I have prepared a few remarks, and suggestions which I recommend you implement before your company goes public.
Internal controls comprises the enterprise of systems established in an organization to provide reasonable assurances that organizational objectives will be achieved. More specifically, internal controls objectives can be achieved based on ...view middle of the document...
First, Being a lean organization it is terribly important that you can trust the people you work with, however it is a mistake to entrust too much power in any single person of the organization. Your accountant who serves as both treasurer and controller should be separated from some of the duties of record keeping. Having one person make all the purchasing decisions and also supplying the money is a conflict of interest and violates the second and third principal. There have been many instances in other companies where records have not been accurately accounted for and that no checks and balances are in place. Even worse we have seen many examples of publically traded companies who were a party of lawsuits and financial ruin due to embezzlement. Although it may be streamlined that your treasurer be responsible for purchased, there should be an independent resource be responsible for the keeping of the records of these transactions. Even a bookkeeper that reports to a different manager would be sufficient in maintaining the duty of record keeping of these transactions.
Second, allowing all employees have access to the petty cash drawer is a breach of 1,3rd and 5th principal. Access to the cash drawer should be given to no more than one person and use of this money should be approved by a manager. For example a manager might be approved to sign off on a 100 dollar distribution, where it might take and executive to sign off on transactions under 1000 dollars and upwards. The exiting system of leaving a note is insufficient and should be abandon. There needs to be a formal receipt which is recorded in a database and an email confirmation from management to approve of such transaction. It’s important there is a paper trail for every dollar spent and its taking a totally unnecessary risk allowing everyone access to the petty cash drawer.
The use of pre-numbered invoices can help identify help identify unauthorized documents that fall outside the range of authorized numbers. It is always a good source of controlled documents to use preordered invoices and receipts
The purchase of an...