Finding Text
Finding 2024-003 Audit Adjustments Condition: The Corporation should have adequate procedures to provide for the accuracy and reliability of the trial balance given to the auditor. During the course of the audit, adjustments that had a material effect on the Corporation’s financial statements are needed to adjust the cash trial balance to accrual. Adjusting entries were proposed to the Corporation. Adjusting journal entries were then made by management to correct for the accrual entries. Although adjustments are not uncommon during the audit process, the independent auditor cannot be considered part of the Corporation’s internal control system. Criteria: Proper controls over financial reporting include an adequate system for recording and processing accrual entries material to the financial statements. Cause: Management has chosen to wait until after the audit to record accrual entries. Effect: Inadequate controls over financial reporting of the Corporation results in the likelihood that the Corporation would not be able to draft accrual financial statements that are materially correct without the assistance of the auditors. Recommendation: We recommend that management establish internal procedures to identify potential material misstatements and make adjustments if needed prior to providing the independent auditor with the trial balance for the period being audited. Repeat Finding: Yes. Views of Responsible Officials and Planned Corrective Actions: Prior to closing out the year-end books, the accounts will be looked at and any needed adjustments will be made.