Finding Text
2025 – 001: Financial Statement Preparation and Audit Adjustments Type of Finding: • Material Weakness in Internal Control Over Financial Reporting Condition: The board and management share the ultimate responsibility for the School's internal control system. While it is acceptable to outsource various accounting functions, the responsibility for internal control cannot be outsourced. A material audit adjustment was proposed and posted through the audit process, including a corrective entry for accounts payable and construction in progress. The adjustment was a necessary step in ensuring the financial statements were fairly stated in accordance with accounting principles generally accepted in the United States of America. Criteria or specific requirement: In an ideal control setting, the School would have a comprehensive control procedure to ensure that the financial statements, including disclosures are complete and accurate. Such review procedures should be performed by an individual possessing a thorough understanding of applicable accounting principles generally accepted in the United States of America. Effect: It is possible that a misstatement of the School's financial statements could occur and not be prevented or detected by the School’s internal control. Cause: Due to change in management and turnover in office, the School’s controls were not able to detect the adjustments made as part of the audit. The School does not have a comprehensive review process to ensure that the financial statements, including disclosures, are complete, accurate, and supported by the School’s records. Repeat finding: Yes – 2024-001. Recommendation: We recommend that management review controls related to financial statement preparation review at the end of each period. Financial statement preparation should include a review of reconciliations and balances to ensure that financial statement line items are properly stated and classified. Internally prepared financial statements should also be thoroughly reviewed by members of the board and management outside the finance department on a periodic (monthly or quarterly). Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding.