Finding Text
Condition: The City does not have an internal control policy in place over the financial statements that would enable management to conclude its financial statements, related footnote disclosures, and supplementary information are complete and presented in accordance with accounting principles generally accepted in the United State of America. The City engages the audit firm to prepare drafts of its annual financial statements, related footnote disclosures, and supplementary information in accordance with accounting principal generally accepted in the United States of America based on information provided by the City. Criteria: Internal control requirements require entities to prevent or detect a material misstatement in the financial statements, footnote disclosures, and supplementary information. Cause: As a small city with limited staff, the City does not have staff trained to prepare financial statements in accordance with regulatory requirements. Effect: The potential exists that a material misstatement of the annual financial statements could occur and not be prevented or detected by the City’s internal control. Recommendation: The City could consider contracting with a separate outside accounting firm to prepare financial statements, footnote disclosures, and supporting schedules prior to the audit. However, this consideration may not have a cost benefit advantage. The City should carefully review the financial statements, footnote disclosures, and supplementary information against requirements and a disclosure checklist, and agree accounting software reports to the audited financial statements and underlying records.