Finding Text
Finding #: 2023-002
Questioned Costs: N/A
Condition: A significant number of account balances required adjustments resulting in a significant amount of audit adjusting journal entries.
Criteria: Identification by the auditor of a material weakness in internal control over financial reporting such that a misstatement would not have been detected by the Entity's internal control should be regarded as a material weakness in internal controls.
Cause: Management's review process does not have sufficient controls to detect misstatements to the financial statements.
Effect: The unadjusted financial statements were materially misstated.
Recommendation: We recommend that Management review their processes and procedures for identifying, capturing, and recording transactions accurately.
Reporting Views of
Responsible Officials:
.
We acknowledge the audit finding concerning the number of account balances that required adjustments and the resulting audit adjusting journal entries.
1. System Conversion: Recently, we underwent a comprehensive system conversion and creation of uniform chart of accounts for all the properties and entities in our portfolio, which, while beneficial in the long term, contributed to the initial discrepancies in our account balances.
2. Improvement in Adjusting Entries: We are pleased to note that there has been a significant reduction in the number of adjusting entries required this year compared to previous years. This indicates that the measures we have put in place are moving us in the right direction.
3. Additional Support: To further support our efforts, we have hired a new accounting manager. This addition to our team will provide the necessary expertise and oversight to ensure accurate transaction recording and reconciliation.
4. Process Improvements: We have implemented several process improvements to streamline data entry, making the recording of transactions more efficient and reducing the likelihood of errors.
5. Enhanced Review Process: To further ensure the accuracy of our financial records, we will implement a review process for all journal entries before they are posted to the general ledger. This additional layer of oversight will help identify and correct any discrepancies early in the process.
We are confident that these actions will enhance the accuracy of our financial transactions and reduce the need for adjusting journal entries in future audits. Management is committed to continuous improvement and will closely monitor these changes to ensure their effectiveness.