Finding Text
Criteria - Management is responsible for establishing and maintaining internal controls in order to safeguard the assets of the Cooperative and achieve accurate financial reporting. Condition - The Cooperative lacked sufficient controls and procedures related to financial reporting, resulting in no formal documentation and review of financial activity, and a lack of understanding the segregation of duties. Cause - Appropriate internal controls and procedures related to financial reporting were not established when the property management agent was hired. Effect - The Cooperative was exposed to an increased risk that misstatements (whether caused by error or fraud) may occur and not be prevented or detected by management on a timely basis. A significant number of journal entries were required to adjust the 2024 financial statements. Recommendation - We recommend that management design and document their internal control process to ensure that they have an adequately designed system of internal controls. Auditee’s comment - Management will design, document and implement a control environment to provide proper internal controls and procedures related to financial reporting and a proper segregation of duties of the Cooperative. Status - Unresolved. Management is in the process of designing and documenting an internal control process to safeguard the assets of the Cooperative and achieve accurate financial reporting.