Finding Text
Finding 2023-002 Preparation of Financial Statements
Condition: The Corporation’s internal control system is designed to provide monthly cash basis financial statements; however, it does not allow for the preparation of the annual accrual financial statements including notes and disclosures as required by U.S. generally accepted accounting principles. As auditors, we were requested to draft the financial statements and accompanying notes to the financial statements.
Criteria: Proper controls over financial reporting include an adequate system for recording and processing entries material to the financial statements, as well as the ability to prepare financial statements and accompanying notes to the financial statements that are materially correct.
Cause: The Corporation does not have an internal control system designed to provide for the preparation of the financial statements being audited.
Effect: Inadequate controls over financial reporting of the Corporation results in the likelihood that the Corporation would not be able to draft the financial statements and accompanying notes to the financial statements that are materially correct without the assistance of the auditors.
Recommendation: We realize that obtaining the expertise necessary to prepare the financial statements, including all necessary disclosures, in accordance with GAAP can be considered costly and ineffective. However, obtaining additional GAAP knowledge through reading relevant accounting literature and attending continuing education courses should help management improve in their ability to prepare internally and take responsibility for reliable GAAP financial statements.
Repeat Finding: Yes.
Views of Responsible
Officials and Planned
Corrective Actions: We agree with the auditor and will take under advisement.