Model Constructions got a contract to complete a housing project in Atlanta, GA. The foreman, Clint Harper, hired 20 workers to do the work on the housing project. Model Constructions wanted to keep the costs down, so it did not want to hire any support staff for Clint. Clint got the employees to complete all of the necessary tax forms, like the W-4 for withholding, their social security information, and so on, and delivered all of the paperwork to the head office in Buckhead, GA. Every week, Clint would collect all of the time tickets from his workers, sign them, and then deliver them to the head office. On Fridays, he would go back to the head office and collect the checks. He was also responsible for distributing all of these checks to the workers.

You are a CPA who audits and prepares financial statements for Model Constructions. In your monthly routine work at the head office, you become aware of this arrangement. You go to the owner, Mr. Lee, to discuss the issues relating to this arrangement.

• Tell Mr. Lee, in detail, the main internal control weaknesses in the situation described. What can be the impact on the business because of these weaknesses?
• Give him suggestions on what needs to be done to rectify this situation.
• Briefly discuss with him the Sarbanes-Oxley Act (SOX) in relation to accounting practices for current and noncurrent assets.